IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, in a recent report on Tata Steel said that, Tata Steel’s rising production cost in India has emerged a key concern among investors.
According to IIFL report, in the coming quarters, operating leverage from higher production, lower raw-material cost, and reduction in a few operating expenses would bring back Ebitda/tonne to ~US$300.
Weak demand in Europe continues to haunt outlook despite several cost reduction initiatives. To check rising debt, Tata Steel may choose to delay the second phase of Kalinganagar expansion and divest non-strategic investments. At 5.7x FY14ii EV/Ebitda, we believe valuations factor in short-term concerns. ADD, the brokerage added.
The report was published by IIFL’s Institutional Equities Research desk.