PINC Research has maintained buy rating on Tata Steel Ltd stock with a price target of Rs 759 in its report dated Dec 15, 2010.

As per reports, Tata Steel's EBITDA will grow at 48% CAGR over FY10-12, driven by its profitable Indian operations, turnaround at Tata Steel Europe on improved capacity utilization, leaner cost structure, partial resource integration, and better steel profitability.

The report expects Tata Steel's consolidated net profit to be Rs62.2bn in FY11 and Rs72.7bn in FY12. We find the stock attractively valued at 5.0x FY12E EV/EBITDA.

What will move the stock?

1) Improved profitability of Tata Steel India with better demand and rising steel prices;
2) Easing of high financial leverage with recent debt restructuring at Tata Steel Europe (capital raising of Rs70bn recently approved);
3) Improved fundamentals of Tata Steel Europe notwithstanding a weak Q3FY11E;
4) Progress on raw material integration in Tata Steel Europe;
5) Brownfield expansion of 2.9mn tonnes at Jamshedpur as per schedule.

Their FY12 consolidated estimates are almost in line with consensus. They value Tata Steel using SOTP methodology at Rs759.

Lower steel profitability on correction in steel prices and/or significant rise in input costs; weak recovery in Europe leading to lower capacity utilization and sustained subdued profitability at Tata Steel Europe; delay in Brownfield expansion; 4) Delay in resource integration will challenge the target price.