We initiate coverage on Tata Steel with a BUY recommendation and a target price of Rs543, suggesting 19% return from current level.
We believe the company will turn around its European operations and that the performance improvement will be visible in FY11E financials.
Our positive stance is based on the view that the benefits of restructuring and the expected improvement in steel prices (medium term) are not adequately reflected in the share price.
We initiate coverage on SAIL with a SELL recommendation and a target price of Rs156. In our view, the current share price fairly reflects the steel price improvement and the earnings growth in the FY09-FY11E period.
Our target price is 7% below the current market price, and hence we recommend a Sell.