>Tata Steel(UBS)

�� Q209 results better than UBSe
Tata Steel Q209 consolidated revenues grew 36% yoy to Rs442.0bn (UBSe
Rs331.9bn), despite flat volume growth driven by improved realizations (36% yoy)
and mix improvements. EBITDA grew 79% yoy to Rs82.5bn (UBSe Rs65.4bn)
and margins improved 450bps yoy to 18.7%. Net profit grew 42% yoy to Rs47.0bn
(UBSe Rs34.4bn). Tata Steel has achieved 124% of total consolidated FY09E PAT
in 1HFY09. Corus has achieved 99% of our FY09E EBITDA estimate in 1HFY09.
�� Key takeaways from the conference call
(1) Indian volumes in 2H09 to be higher than 1H09 (2) Capex expected to be
Rs10bn in 2H09 and Rs30bn in FY10E incl. Orissa and Jamshedpur expansions (3)
Working capital will decline in 2H09 as Tata Steel will not purchase raw material
and will liquidate its inventory. (4) Tata Steel is in compliance with all covenants
in India and UK.
�� Pension funds surplus at UK increases
Tata Steel UK pension fund surplus increased by £127mn during the quarter to
£819mn. Tata Steel has reduced its pension assets’ exposure in equity markets
marginally from 26% in Mar08 to 25% in Sep08, while increased its exposure to
bonds by 4% to 69%. We believe that pension surplus/deficits can be volatile; and
are not reflective of the underlying operations.
�� Valuation: Rate Neutral with a PT of Rs230
We rate Tata Steel Neutral with a DCF-based PT of Rs230 assuming WACC of
13.5%, medium term growth rate of 10.0% and terminal growth of 5.0%.

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