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The West Coast Paper Mills & Tata Steel

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Current market price: Rs 90,
Fair value: Rs 97

Crisil Equities assigned fundamental grade of 3/5 to The West Coast Paper Mills (West Coast) indicating Rs good' fundamentals. The company has recently expanded capacities to 3.15 lakh tonnes per annum making it the fifth largest paper manufacturer in India. Replacement of its old fibreline, as part of its expansion plan, is expected to improve West Coast's operating efficiency and margins. Crisil Equities expects West Coast's revenues to grow at a two-year CAGR of 37 per cent to Rs 1,170 crore in FY12, while EPS is expected to increase to Rs 15.5 in FY12 from Rs 8.8 in FY10. It has assigned a price earnings of 6x to FY12 EPS of Rs 15.5 and has valued West Coast's 36 per cent stake in Rama Newsprint at Rs 4 per share.

— Crisil Equities


Reco price: Rs 510
Target price: Rs 650

and (SSI) have entered into an MoU for potential sale of Products (TCP) in UK. The transaction is valued at around $500 million. Since, TCP has a production capacity of 3.9 mtpa, this implies a valuation of $128/t. Besides, the Redcar Blast Furnace and Lackenby steelmaking facilities, the assets sold include Redcar and South Bank coke ovens, power generation facilities and a sinter plant. The reduced sales volume (of slabs) on account of TCP mothballing had also been factored. The cash inflows of $500m add around Rs25 per share to the intrinsic value of the stock. The stock is trading at 5.4x EV/Ebitda and 7.8x P/adj EPS, both on FY12E basis. Maintain buy .

—Ambit Capital

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