Tata Steel's consol EBITDA is expected to grow at 48% CAGR over FY10-12, driven by its profitable Indian operations and turnaround at Tata Steel Europe (TSE), better capacity utilization, leaner cost structure, partial resource integration, and improving steel profitability.

With recent debt restructuring at TSE, we expect high financial leverage to ease.

Furthermore, the board has approved capital raising (common/DVR) of Rs70bn recently.

At CMP of Rs590, we find the stock attractively valued at 4.7x FY12E EV/EBITDA. We value Tata Steel using SOTP methodology at Rs759.