Credit Suisse upgrades Tata Steel on better valuation

Credit Suisse has upgraded Tata Steel to 'neutral' from 'underperform', citing valuation comfort at current levels.

"FY13 should be an eventful year for Tata. Its domestic expansion is now just 1Q away, iron ore/coal output from Canadian/Mozambique mines should also start, and its EU business should release working capital," the investment bank said in a note on Tuesday.

"These can materially change its cash generation potential."

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However, weak steel market will continue at least till the first half of FY13 on back of supply-chain unwinding in Europe, uncertainty in China and demand slowdown in India, it said and lowered its target price on Tata Steel stock to 340 rupees from 400 rupees. The stock closed at 341.10 rupees on Monday.

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"While a $6 billion market cap on $15 billion Enterprise Value makes an EV/EBITDA driven fair value extremely volatile, we believe short of a global crisis, it is hard to justify a fair value below 340 rupees," it said.

Reuters