1. Metal Sector
Steam is still left…..

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

3. Steel World Demand: Is its real

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

5. 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

6. 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.

7. 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

8. 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 $ at least for next six months

9. 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.

10. 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

11. 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

12. Base Metal: Short term Pressure to Hurt

13. 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

14. In a nutshell Demand outlook is gradually improving across the world
Prices are expected to be in the range of $ /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

15. Company Section

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

17. 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.

18. 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.

19. 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%

20. 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)

21. 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.

22. 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

23. 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%