Metal Sector Steam is still left…..

Overview of presentation Steel Demand Supply & prices Base Metal Raw Material Prices & outlook Top Picks Tata Steel, JSW Steel, Sterlite Industries.

Steel World Demand: Is its real

World Demand: Is its real Europe Steel Production USA Steel Production

World Demand: Is its real Demand is improving in the developed word Capacities utilization ratio is gradually improving Companies are booking orders for March- April Inventories are also rising

China: A big Puzzle Production in China is at all time high level Stimulus is expected to convert this production into real consumption. Imports of iron ore is also at all time high level. So far China is not exporting to the whole world.

India: Growth Story is Intact India Consumption is expected to improve further due to massive infrastructure spending There is no supply side pressure Imports from China and CIS countries are gradually increasing

Prices N Europe HRS Price Movement ($/ton) After stabilizing prices have corrected almost $50/ton in western world Aggressive Re-stocking led to price fall Ideal capacities are coming on stream. Withdraw of stimulus is a big risk. Price are expected to be in the range of $500-600 at least for next six months

China: Prices remains Volatile Inspite of all time high production prices have corrected almost 10-12% in past three months Prices are expected to be at the same level for next 6 months.

India: Price erosion to curb margins Prices corrected due to price war in the domestic steel industry Cheap imports forced Indian companies to curb prices Prices are expected to be in the same range at least for next 6 months. Prices

Raw material: Pressure is started again After consolidating RM prices have substantially moved up Coking coal prices are also hovering around $170/ton Increasing RM prices could hurt Margin Increasing raw material & decreasing Steel prices doesn't gel up

Base Metal: Short term Pressure to Hurt

Base Metals…..Continue….. Appreciating dollar will create short term pressure for commodities. Rising level of inventories will create pressure. China's destocking could create short term pressure. We believe that Base metals could correct 10-15% from these levels and then consolidate

In a nutshell Demand outlook is gradually improving across the world Prices are expected to be in the range of $500-600/ton at least for next 2-3 quarters. Raw material pressure will not be their. China is not expected to disrupt demand supply situation of whole world

Company Section

TATA Steel Geared up for growth…. 454(5.1x of FY11) TP-641 (5.5x of FY11 EV/EBITDA)

Investment Arguments Capacity Utilization ratio is gradually increasing in Europe. Corus will be EBITDA positive in Q3FY10. Money raised; discards concerns over excess leveraging Raw material indicatives are expected to give some benefit.

Investment Arguments Enough Cash flow generation to meet debt obligation and capex funding More equity raising might happen for capex Raw Material benefit to occur from Q3FY10. South East Asia subsidiaries are also doing good.

Financial highlight Rs Mln FY07 FY08 FY09 FY10E FY11E Net Sale 252,124 1,315,359 1,473,293 928,840 1,130,241 EBITDA 70,966 174,454 176,103 112,805 189,452 Net Profit 41,773 123,500 49,509 26,623 78,193 EPS 72.0 169.2 67.8 30.0 88.2 % Growth 24% 422% 12% -37% 194% PE 6.30 2.68 6.70 15.13 5.15 EV/EBITDA 5.69 4.73 4.93 8.14 4.62 RoE 28.6% 36.1% 17.9% 8.3% 20.2% ROCI 17.0% 23.4% 11.5% 7.3% 14.8%

Dark Horse…. 691(5.4x of FY11) TP-1108 (6x of FY11 EV/EBITDA) JSW Steel Dark Horse…. 691(5.4x of FY11) TP-1108 (6x of FY11 EV/EBITDA)

Investment Arguments Capacity expansion &Changing Product mix will provide volume visibility for company Improving US economy will provide respite for US Plate and Pipe mill. Enough Cash flow generation to meet debt obligation and capex funding. Commissioning of New HSM & Beneficiation plant will provide margin stability.

Investment Arguments Jharkhand Coking coal block will substantially reduce Coking coal cost Raw Material pressure to persist Changing product mix will help company to maintain EBITDA/ton

Financial Highlight Rs Mln FY07 FY08 FY09E FY10E FY11E Net Sale 85,544 124,567 162,065 181,550 226,914 EBITDA 26,678 34,781 32,535 42,407 63,225 Net Profit 13,040 16,402 2,339 13,400 23,814 EPS 79.52 87.69 12.50 71.64 127.31 % Growth 38% 46% 28% 13% 25% PE 8.69 7.88 55.26 9.65 5.43 EV/EBITDA 5.68 7.07 8.90 6.88 4.83 RoE 23.0% 20.8% 3.0% 15.0% 21.5% ROCI 23.5% 6.0% 12.9% 16.7%