Technically, Tata Steel (CMP:317) has good positional support of around 309 zone & sustain below that it could fall 290 and 266 zone (low probability as of now).
In fact, it has already took support of 309 zone few days ago & sustain above 327-345 zone, it may again target 380-422 zone in the short term. In the mid term, it may target 475-525 zone and its long term target may be around 625-685 zone (For all this to happen, it has to give consecutive close above 435).
Tata Steel is one of the huge under performer in our market, specially from Aug'2014 on the back of Apex Court ruling on coal mines and also on iron & manganese ore mines operations. The ruling also have severe adverse effect on the overall metal sectors.
Going ahead, the new MMDR bill may proved to be beneficial for metal sector including Tata Steel, as it addressed the uncertainties on mineral (iron ore etc) mining & leasing, which is the key raw material of this metal sector. Although, Tata Steel, may have to dish out considerable amount of extra royalty as a fall out of this bill, overall impact may be positive in the long term. This factor, along with resolve of coal mining issue might be a game changer in the next few months for the overall metal sector.
Tata Steel is also exploring very actively every delevarage scope to reduce its massive consolidated balance sheet debt of around Rs.70000 cr.
Overall, we may see gradual re-rating of this metal sector & Tata Steel also, in the coming days as thrust on infrastructure & overall economic activity in "Modinomics" may create considerable demand for this sector & current dimmed out look may be changed.
As par BG metrics of techno/funda model, median valuation of Tata Steel is around 480 (consolidated data) & 290 (stand alone data), considering the present poor PE of around 8 for this metal sector. Going ahead, if the current coal & mining issues resolved on the positive side of this sector, market could give a reasonable PE of around 15 for this sector and in that scenario, median value of Tata Steel should be around 655 (on consolidated basis).
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | LONG TERM | SHORT TERM | MEDIAN VALUE | 200-DEMA | 10-DEMA |
| TATASTEEL | 28.67 | 417.33 | 7.98 | 306.78 | 272.77 | 289.78 | 411.37 | 325.22 |
| TATASTEEL | 78.29 | 629.6 | 7.98 | 506.96 | 450.76 | 478.86 | 411.37 | 325.22 |
| TATASTEEL | 78.29 | 629.6 | 15 | 695.05 | 618.00 | 656.52 | 411.37 | 325.22 |
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