After turning around on a quarterly basis in 2009-10 itself, Tata Steel turned around on an annual basis in 2010-11 and reported a consolidated net profit of Rs 8,983 crore for the year compared to a net loss of Rs 2,009 crore in the previous year.
The performance of its European operations continues to improve. For example, European operations witnessed strong volumes of 4.13 mt in the fourth quarter of 2010-11 compared to 3.47 mt in the previous quarter. This is partially on account of the company's efforts towards de-stocking. Analysts believe that these volumes should decline sequentially in the first quarter of 2011-12.
Tata Steel has also sold its entire stake in Riversdale Mining for a consideration of $1.11 billion. This value unlocking at a gain of around 100% (considering that its total investment was only of $573 million) will help it to manage the finances better.
However, the European debt crisis poses a problem. Since it has a significant exposure in
Europe, any blow out (Greece defaulting on its sovereign debt and contagion across Euro zone area) there can affect the company, both fundamentally as well as on the sentiment front. So investors are advised to buy slowly into this counter.
Our Recommendation :
Buy Tata Steel around 525 levels and hold for 1 year for a target price of 750