Asia Pacific Equity Research

24 May 2013

Tata Steel Ltd

At last - a positive beat across segments on underlying earnings with NO one-time benefits; the worst is behind us
Tata delivered a strong beat across segments after a long time and it was essentially driven by higher volumes and lower costs. In our view, the strong results combined with steel prices likely bottoming out, inexpensive valuations (stock trades at GFC levels on P/BV) and under ownership should drive an up move in the stock. Strong operating beat and NO one-time benefits: Across India, Europe, Southeast Asia there was a strong beat at the EBITDA level. India EBITDA/T increased q/q to Rs14,500/t with total EBITDA at Rs33bn (vs. Rs29bn JPMe, consensus at Rs29.7bn) at the standalone entity. This was even as realizations were flat q/q (on account of weaker product mix). TATA expects additional volume of +1mt in FY14 from the expansion. Standalone PAT (normalized) at Rs20bn was sharply ahead of estimates. Europe EBITDA at Rs6bn was ahead of JPMe driven essentially by higher volumes. Southeast Asia also reported strong EBITDA. The only weak part was in the South African unit. Consol EBITDA stood at Rs43.7bn (vs. JPMe Rs34bn; consensus Rs32.5bn) and was the highest in seven quarters. The impairment charge (pre announced) stood at Rs83bn. The goodwill impairment was mostly in the long products division of Tata Europe. A clean operating result with no one-time gains associated with the Q4 beat: The company clarified that there are no one-time non recurring gains in Q4, particularly in Europe. While investors would likely wait for two to three quarters more to confirm this, in our view, the Q4 results and positive management body language does indicate that the worst is likely over as: a) stabilization of India expansion that resulted in lower EBITDA in the previous three quarters; b) benefits of Europe restructuring. From here, while Europe steel environment remains challenging, the era of large losses are likely behind us. Strong operating cash flows: FY13 results also highlight the cash flow strength of the company. TATA spent Rs152bnbn in capex while operating cash flows stood at Rs133bn. We maintain our view that TATA should be able to implement its large Odisha expansion program mostly with internal cash flows.

Overweight
TISC.BO, TATA IN Price: Rs299.55 Price Target: Rs530.00

India Metals & Mining Pinakin Parekh, CFA

AC

(91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com J.P. Morgan India Private Limited

Neha Manpuria
(91-22) 6157-3589 neha.x.manpuria@jpmorgan.com J.P. Morgan India Private Limited

Daniel Kang
(852) 2800 8570 daniel.kang@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
550 450 Rs 350 250
May-12 Aug-12 Nov-12 Feb-13 May-13

TISC.BO share price (Rs) BSE30 (rebased)

Abs Rel

YTD -31.6% -32.1%

1m -3.1% -5.7%

3m -17.8% -19.6%

12m -24.4% -47.8%

DPS cut a positive in our view, asset sales - 'No Touch me Not policy': The
DPS cut (Rs8 from Rs12 in FY12) is positive and does highlight the managements commitment to conserve cash. On question of asset sales, management highlighted that portfolio reorganization is an ongoing process.
Tata Steel Ltd (Reuters: TISC.BO, Bloomberg: TATA IN) Rs in bn, year-end Mar FY11A FY12A FY13E Net Sales (Rs bn) 1,188 1,329 1,313 Net Profit (Rs bn) 90 54 (86) EPS (Rs) 86.95 53.21 (85.17) Net Profit growth (%) (546.8%) (40.0%) (260.1%) ROE 26.6% 12.5% (21.1%) P/E (x) 3.4 5.6 NM P/BV (x) 0.8 0.7 0.8 EV/EBITDA (x) 4.7 6.2 7.5
Source: Company data, Bloomberg, J.P. Morgan estimates.

FY14E 1,376 35 34.73 (140.8%) 9.5% 8.6 0.8 6.1

FY15E 1,454 59 58.44 68.2% 14.7% 5.1 0.7 5.1

Company Data 52-week Range (Rs) Market Cap (Rs mn) Market Cap ($ mn) Price (Rs) Date Of Price 3M - Avg daily volume (mn) 3M - Avg daily value ($ mn) BSE30

455.60-292.50 303,444 5,470 299.55 23 May 13 5.05 29.2 2,0062.24

See page 12 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Company description

P&L sensitivity metrics Sales volume growth assumption India Impact of each 1% Sales volume growth assumption Corus Impact of each 1% Average realization growth assumption India Impact of each 1% Average realization growth assumption Corus Impact of each 1% Raw Materials cost assumption Impact of each 1%
Source: J.P. Morgan estimates.

Tata Steel is the worlds sixth-largest steel company with an existing annual crude steel production capacity of ~30 MTPA. Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 9.7MTPA. Through investments in Corus, Millennium Steel and NatSteel Holdings, Singapore, it has created a manufacturing network spanning Europe, South East Asia and the Pacific Rim countries.

EBITDA impact (%) 0.4% 3.0% 1.3% 4.5% 2.0%

EPS impact (%) 0.8% 7.0% 2.1% 13.1% 5.0%

Price target and valuation analysis

Revenue customer chart (FY12)
Asia ex India, 10% Others, 3% India, 26%

Our Jun-14 PT is Rs530 based on SOTP and we value the India operations at 6.0x, 5.0x for Asia and 5.5x for European operations FY15E EBITDA. Key risks (other than macroeconomic weakness) include sharp decline in India profitability, weakness in steel price and decline in European demand.

Europe, 62%

Source: Company reports.

EPS estimates: J.P. Morgan vs. consensus

Rs FY13E FY14E FY15E J.P. Morgan 4.2 34.7 58.4 Consensus 9.3 33.9 41.4

Source: Bloomberg, J.P. Morgan estimates. Note: JPMe EPS recurring

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Strong performance across all segments with no one-off items

TATA reported 4QFY13 EBITDA of Rs43.7bn (+95% q/q; 37% y/y) was well above JPMe and consensus driven by better-than-expected performance in all the three key regions. Recurring PAT in the quarter was also above expectation at Rs7.3bn (vs. Rs2.6bn JPMe). Consol interest in the quarter declined 4% q/q as interest cost declined for its debt. The company reported an Rs83.5bn asset impairment and goodwill write-off related to its investment in Tata Steel Europe (mostly in the long products division), KZN and also some Thailand asset.

India: Strong volume growth and lower cost aid EBITDA

TATA reported standalone EBITDA of Rs33bn (+10% y/y; +31% q/q) vs. JPMe (Rs29bn) and consensus (Rs29.7bn). India volume growth of 21% q/q (+29% y/y) and the 10% decline in operating cost/mt drove the EBITDA beat in the quarter. Steel realizations declined 2% q/q driven by lower flat steel realizations, in our view. The company indicated that despite the weak auto environment, TATA maintained its sales to the segment and sold the additional volume from the expansion (850kt in FY13) in other flat steel segments. Management indicated an additional 1mt sales in FY14 from the expansion. Operating cost decline was driven by a 13% decline in RM cost/mt (as external coke purchase declined post commissioning of CoB 10 in Dec-12) and lower power costs. Employee cost increased 17% q/q due to retiral provision increase and salary increase for non-officer employees. Lower costs and higher volumes helped improve EBITDA/mt to Rs14.5k/mt (+8% q/q vs. flat expectation by JPMe). Interest cost in Standalone results also declined 10% q/q due to lower interest rates and absence of one-time cost seen in 3Q. Depreciation increased 6% q/q with the further capitalization of the Jamshedpur expansion. Other income also increased sharply (Rs4.7bn vs. Rs357Mn in 3Q) due to dividend income received from Kalimati Investments on part sale of Titan stake. Recurring PAT in the quarter was Rs19.9bn, well above JPMe (Rs14bn). The standalone business also included Rs6.9bn impairment on Tata KZN (South African sub) given the shortage of chromite ore becoming a structural issue.

Europe: Strong volumes drive EBITDA beat

Tata Steel Europe reported EBITDA of Rs6.1bn (vs. Rs4.3bn loss in 3Q, but down 41% y/y), well above our expectation driven by 13% volume growth in the quarter (3.42mt vs. JPMe 3.2mt). While realizations decline 7% q/q, the improvement in cost base (cost per tone declined 12% q/q) helped offset the decline. The EBITDA/MT for the quarter at Rs1792/mt was well above our expectations. We believe these results are even more commendable given there were no one-time gain that led to the strong performance in the quarter. Management indicated that the company can continue to improve performance from the current levels into FY14.E

Asia: Better-than-expected performance

Southeast Asian business also reported an EBITDA beat (Rs2.2bn vs. JPMe Rs1.6bn) despite the 2% decline in volumes q/q. Realization increased 3% q/q with cost/mt increasing 1%. Management indicated that demand remains strong in
3

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Singapore leading to best performance at NatSteel in 10 years. TATA Steel Thailand also reported an improvement in EBITDA q/q (329mn Baht in Q4 vs. 135mn Baht in Q3).

Capex and Balance Sheet Update

While operating cash flows stood at Rs133bn in FY13, TATA spent Rs152bn in capex. The company indicated total capex of Rs245bn on Odisha Phase I till Oct-14. While it has tied up funding for the project, the company would try to fund the capex through internal cash flow. As per our calculations, net debt stood at Rs400bn in FY12 and Rs466bn in FY13. A large part of the Rs66bn increase in reported net debt is driven translation given that the INR depreciated by 7% y/y. Management highlighted that net debt is unlikely to materially decline in the near term given Odisha Capex. Management also indicated long term target of net dent/equity at 1x (lower on standalone) and Net debt/EBITDA above 3x.

Pension Surplus increases

Pension surplus in the European operations increased in the quarter to 283mn vs. 78mn in Dec-12. This is the highest pension surplus amount since Jun-11.
Table 1: Tata Steel: Segmental Results
2QFY13 Revenues Rs Mn Corus SE Asia India Others Total Sales EBITDA Rs Mn Corus SE Asia India Others Total EBITDA Deliveries Volumes MT Corus SE Asia India Total Volumes Realization per MT Corus SE Asia India Avg Steel Realization/MT EBITDA/MT Corus SE Asia India Cost/MT Corus SE Asia India
Source: Company reports.

3QFY13 181,260 34,650 93,700 11,460 321,070 (4,280) 1,440 25,250 110 22,520 3.0 0.8 1.9 5.8 60,020 42,256 49,577 55,072 (1,417) 1,756 13,360 61,437 40,500 36,217

4QFY13 191,660 34,860 107,710 12,270 346,500 6,130 2,240 37,140 (1,830) 43,680 3.4 0.8 2.3 6.6 56,041 43,575 47,262 52,820 1,792 2,800 16,297 54,249 40,775 30,965

% y/y -4% 11% 14% -15% 2% -41% 111% 25% -74% 28% -4% 10% 29% 5% 0% 1% -12% -3% -39% 93% -3% 2% -2% -16%

% q/q 6% 1% 15% 7% 8% -243% 56% 47% -1764% 94% 13% -2% 21% 13% -7% 3% -5% -4% -226% 59% 22% -12% 1% -15%

199,230 31,520 94,790 14,450 339,990 10,410 1,060 29,750 (7,030) 34,190 3.6 0.7 1.8 6.2 56,121 43,178 53,614 54,661 2,932 1,452 16,827 53,189 41,726 36,787

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Table 2: Tata Steel Consolidated Results

Rs Mn, % Net Sales EBITDA Interest Depreciation Other Income PBT Tax Recurring PAT Reported PAT EBITDA Margin Net Margin EBIT Margin
Source: Company reports.

4QFY12 339,986 31,788 11,280 10,931 2,220 11,798 9,766 2,032 4,335 9% 1% 6%

3QFY13 321,071 22,389 10,323 14,628 559 -2,003 5,685 -7,689 -7,631 7% -2% 2%

4QFY13 346,505 43,689 9,947 14,696 (679) 18,368 11,015 7,353 -65,285 13% 2% 8%

% y/y 2% 37% -12% 34% -131% 56% 13% 262%

% q/q 8% 95% -4% 0% -221% -1017% 94% -196%

Figure 1: TATA: Standalone 4QFY13 Results: QoQ Variation

Source: Company reports.

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Figure 2: TATA: Consol 4QFY13 Results: QoQ Variation

Source: Company reports.

Table 3: TATA Europe vs. MT's FCE Performance ($/MT)

Jun-11 MT-FCE Volumes ASP EBITDA/MT TATA-Europe Volumes ASP EBITDA/MT Cost/MT
Source: Company reports.

Sep-11 6.39 1205 57 3.48 1242 30 1212

Dec-11 6.19 1132 4 3.35 1155 -44 1199

Mar-12 7.46 1035 17 3.55 1103 8 1095

Jun-12 6.77 884 56 3.21 1143 35 1109

Sep-12 5.84 856 33 3.42 1124 -2 1123

Dec-12 5.96 847 52 3.02 1092 -26 1118

Mar-13 6.89 831 44 787 3.42 1035 33 1001

% y/y -8% -3% 148% -7% -4% -6% 305% -9%

% q/q 16% -2% -16% -1% 13% -5% -228% -10%

7.17 1193 89 3.5 1313 78 1235

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Figure 3: TATA's India Volume

2.40 2.20 2.00 1.80 1.60 1.40 1.20 1.71 1.59 1.65 1.62 1.77 1.59 1.89 1.73 2.28 35% 30% 25% 20% 15% 10% 5% 0% -5%

Figure 4: TATA's India EBITDA/MT ($/MT)

19,517 20,000 19,000 17,914 17,483 18,000 16,921 16,807 17,000 16,218 16,000 14,545 14,498 15,000 13,366 14,000 13,000 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

India Volume
Source: Company reports.

% Chg
Source: Company reports.

India (Rs/MT)

Figure 5: TATA's Europe Volume

4.20 4.00 3.80 3.60 3.40 3.20 3.00 3.50 3.48 3.35 3.21 3.02 3.55 4.13 10% 5% 0% 3.42 3.42 -5% -10% -15% -20%

Figure 6: TATA's Europe EBITDA/MT ($/MT)

100 80 60 40 20 0 -20 -40 -60 85 78 30 8 -2 -44
3QFY12

35

33

-26
4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

4QFY11

1QFY12

2QFY12

Europe Volume
Source: Company reports.

% Chg
Source: Company reports.

Europe

Figure 7: TATA's Consol Net Interest Expense

12,000 10,000 8,000 6,000 4,000 2,000 0 1,025 9,060 7,377 5,957 5,686 6,796 7,704 9,764 10,626

Figure 8: TATA's India Net Interest Expense

6,000 5,000 4,000 3,000 2,000 1,000 0 -1,000 -2,000 -3,000 -4,000 4,733 2,966 2,107 2,283 3,310 3,026 2,142

-153 -3,254

Consol Net Int Exp

Source: Company reports. Source: Company reports.

India Net Int Exp

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Figure 9: Tata Europe Pension Surplus (GBP Mn)

400 350 300 250 200 150 100 50 0 347 350 283 211 159 106 90 38 Sep-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 34 Sep-12 Dec-12 Mar-13 78

Pension Surplus (GBP MM)

Source: Company reports.

Valuation and Key Risks

Our Jun-14 PT is Rs530 based on SOTP and we value the India operations at 6.0x, 5.0x for Asia and 5.5x for European operations FY15E EBITDA. Key risks (other than macroeconomic weakness) include sharp decline in India profitability, weakness in steel price and decline in European demand.
Table 4: Tata Steel SOTP breakup
Europe India Asia Total EV Net Debt CWIP Pension Deficit Derived Equity Value No of Shares (MM) Target Price (Rs/share) FY 15 EBITDA (Rs bn) 31.9 141.2 4.0 Multiple (x) 5.5 6.0 5.0 EV (Rs bn) 176 847 20 1,043 590 126 43 537 1,013 530

Source: Company reports and J.P. Morgan estimates. Note: Adjusted for CWIP.

Figure 10: TATA P/BV (ex Goodwill) Bands

1,000
PX_LAST 0.8x 2x 3x 4x

900

800

700

4x

600 3x 500 2x

400

300 0.8x

200

100

Jan-93 Apr-94 Jul-95 Oct-96 Jan-98 Apr-99 Jul-00 Oct-01 Jan-03 Apr-04 Jul-05 Oct-06 Jan-08 Apr-09 Jul-10 Oct-11 Jan-13

Source: Company reports, Bloomberg and J.P. Morgan estimates.

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Figure 11: TATA EV/EBITDA Bands

1000 900 800 700 600 500 400 300 200 100 0 Jan-93 Dec-94 Nov-96 Oct-98 Sep-00 Aug-02
Price (Rs)

7x

6x

5x

Jul-04
5x

Jun-06 May-08 Apr-10

6x 7x

Mar-12

Source: Company reports, Bloomberg and J.P. Morgan estimates.

Figure 12: Global Steel EV/EBITDA

10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 7.8 8.1 8.1 8.6 8.9 9.0

4.4 2.6

4.6

4.9

4.9

5.1

5.2

5.3

5.4

5.8

6.0

6.4

6.9

7.2

7.4

Source: Company reports, Bloomberg and J.P. Morgan estimates.

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Tata Steel Ltd: Summary of Financials

Income Statement Rs in billions, year end Mar Revenues % change Y/Y EBITDA % change Y/Y EBITDA margin EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (Pre exceptionals) % change Y/Y Shares outstanding EPS (reported) % change Y/Y Balance sheet Rs in billions, year end Mar Cash and cash equivalents Short term investments Accounts receivable Inventories Others Current assets Net fixed assets Total Assets FY12 1,329 11.9% 126 (21.3%) 9.5% 81 (30.3%) 6.1% (29) 52 (46.7%) (36) 69.6% 54 (40.0%) 1,013 53.21 (38.8%) FY12 108 14 149 256 39 566 621 1,472 FY13E 1,313 (1.2%) 118 (6.0%) 9.0% 63 (21.5%) 4.8% (32) 32 (39.4%) (27) 86.7% (86) (260.1%) 1,013 (85.17) (260.1%) FY13E 82 14 79 275 18 468 694 1,371 Cash flow statement FY14E FY15E Rs in billions, year end Mar 1,376 1,454 Net income (Pre exceptionals) 4.8% 5.7% Depr. & amortization 151 179 Change in working capital 27.4% 18.8% Cash flow from operations 11.0% 12.3% 95 123 Net Capex 50.2% 28.9% Free cash flow 6.9% 8.4% (32) (34) Equity raised/(repaid) 63 89 Debt raised/(repaid) 98.7% 41.4% Other (28) (30) Dividends paid 44.0% 33.4% Beginning cash 35 59 Ending cash (140.8%) 68.2% DPS 1,013 1,013 34.73 58.44 (140.8%) 68.2% Ratio Analysis FY14E FY15E Rs in billions, year end Mar 80 144 EBITDA margin 14 14 Operating margin 83 88 Net margin 251 230 18 18 Sales growth 447 495 Net profit growth EPS growth 772 844 1,427 1,548 Interest coverage (x) Net debt to total capital Net debt to equity 57 57 Sales/assets 236 245 Assets/equity 69 80 ROE 362 382 ROCE 635 691 39 39 1,036 1,112 380 425 375.40 419.26 FY12 54 45 21 86 (165) (79) 17 18 40 (13) 109 108 11.51 FY13E (86) 55 17 76 (127) (52) 0 73 (132) (13) 108 82 11.51 FY14E 35 56 29 120 (134) (14) 0 26 0 (14) 82 80 12.24 FY15E 59 57 36 152 (129) 23 0 56 0 (15) 80 144 12.96

FY12 9.5% 6.1% 4.1% 11.9% (40.0%) (38.8%) 4.4 50.1% 102.7% 0.9 3.3 12.5% 2.4%

FY13E 9.0% 4.8% (6.6%) (1.2%) (260.1%) (260.1%) 3.7 60.6% 158.8% 0.9 3.5 (21.1%) 0.8%

FY14E 11.0% 6.9% 2.6% 4.8% (140.8%) (140.8%)

FY15E 12.3% 8.4% 4.1% 5.7% 68.2% 68.2%

Liabilities Short-term loans 47 57 Payables 206 227 Others 124 69 Total current liabilities 377 353 Long-term debt 546 609 Other liabilities 80 39 Total Liabilities 1,003 1,001 Shareholder's equity 458 359 BVPS 452.55 354.43 Source: Company reports and J.P. Morgan estimates.

4.7 5.3 60.5% 57.5% 157.3% 138.9% 1.0 1.0 3.8 3.7 9.5% 14.7% 5.1% 7.3%

10

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

JPM Q-Profile
Tata Steel Ltd. (INDIA / Materials)
As Of: 17-May-2013 Quant_Strategy@jpmorgan.com

Local Share Price

1,000.00 900.00 800.00 700.00 600.00 500.00 400.00 300.00 200.00 100.00 0.00 Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09

Current:

308.55

12 Mth Forward EPS

140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 -20.00 -40.00 -60.00 May/02 Jul/03 May/09 Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 Dec/02 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08

Current:

37.12

Dec/09

Jul/10

Feb/11

Sep/11

Apr/12

Nov/12

Dec/09

Jul/10

Feb/11

Sep/11 Sep/11

Apr/12 Apr/12 Apr/12 Apr/12

Earnings Yield (& local bond Yield)

60% 50% 40% 30% 20% 10% 0% Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09
12Mth fwd EY India BY Proxy

Current:

12%

Implied Value Of Growth*

1.50 1.00 0.50 0.00 -0.50 -1.00 -1.50 -2.00 -2.50 -3.00 -3.50 -4.00 Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09 Dec/09

Current:

12.70%

Dec/09

Jul/10

Feb/11

Sep/11

Apr/12

Nov/12

Jul/10

Feb/11

PE (1Yr Forward)
18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09

Current:

8.3x

Price/Book Value
6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x
PBV hist PBV Forward

Current:

Dec/09

Jul/10

Feb/11

Sep/11

Apr/12

Nov/12

-1.0x Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09 Dec/09 Jul/10 Feb/11 Sep/11 Nov/12

ROE (Trailing)
70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 -10.00 -20.00 Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09

Current:

0.15

Dividend Yield (Trailing)

12.0 10.0 8.0 6.0 4.0 2.0 0.0 Apr/98 Nov/98 Jun/99 Jan/00 Aug/00 Mar/01 Oct/01 May/02 Dec/02 Jul/03 Feb/04 Sep/04 Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09 Dec/09

Current:

Jul/10

Feb/11

Sep/11

Dec/09

Feb/11

Sep/11

Summary
Tata Steel Ltd. INDIA Materials 12mth Forward PE P/BV (Trailing) Dividend Yield (Trailing) ROE (Trailing) Implied Value of Growth 5387.46 4.851083 SEDOL 6101156 Metals & Mining Latest Min 1.77 8.31x 0.38 0.70x 1.18 3.96 -7.95 0.15 -3.37 12.7% 17-May-13 As Of: 308.55 Local Price: 37.12 EPS: % to Max % to Med % to Avg 106% -5% -3% 612% 189% 201% 167% -31% -24% 39122% 19988% 20576% 367% -68% -156%

Max 17.10 5.01 10.57 60.09 0.59

Median 7.91 2.03 2.72 30.77 0.04

Nov/12

Average 8.08 2.12 3.02 31.67 -0.07

2 S.D.+ 12.95 4.25 6.10 68.35 0.98

2 S.D. 3.22 -0.02 -0.06 -5.00 -1.13

% to Min -79% -45% -70% -5291% -2757%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs

* Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

Nov/12

Jul/10

Apr/12

Nov/12

Nov/12

0.7x

3.96

11

Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Tata Steel Ltd.

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Tata Steel Ltd. Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Tata Steel Ltd. Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: Tata Steel Ltd. Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking Tata Steel Ltd. Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Tata Steel Ltd. Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Tata Steel Ltd. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com.
Date
Tata Steel Ltd (TISC.BO, TATA IN) Price Chart

Rating Share Price (Rs) N N N N N N N N N OW OW OW OW OW OW OW OW 654.72 881.90 651.20 600.35 248.20 164.70 387.90 416.45 471.55 645.15 606.95 622.45 559.40 491.35 447.60 467.50 414.45 406.10 403.95 376.00 311.85

Price Target (Rs) 740.00 800.00 740.00 690.00 290.00 155.00 415.00 425.00 475.00 605.00 665.00 820.00 785.00 685.00 630.00 605.00 590.00 580.00 530.00 505.00 530.00

21-Sep-07 11-Aug-08 29-Aug-08 17-Oct-08 29-Jun-09 03-Sep-09 30-Oct-09 15-Jan-10 14-Nov-10 14-Jan-11 09-Sep-11 11-Nov-11 03-Feb-12 14-Aug-12 09-Nov-12 14-Feb-13

15-May-08 N
1,524 1,270 N Rs690 N Rs475 OW Rs605 OW Rs530

N Rs740 N Rs155

N Rs425

OW Rs820 OW Rs630 OW Rs580 OW Rs530 N Rs665 OW Rs785 OW Rs685 OW Rs590 OW Rs505

03-Dec-08 N

1,016 Price(Rs)

N Rs740 N Rs800 N Rs290 N Rs415N Rs605

762

508

254

23-May-11 OW

0 Sep 06 Jun 07 Mar 08 Dec 08 Sep 09 Jun 10 Mar 11 Dec 11 Sep 12

Jun 13 19-Jul-12

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Sep 21, 2007.

20-May-13 OW

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
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Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research website, www.jpmorganmarkets.com. Coverage Universe: Parekh, Pinakin: ACC Limited (ACC.BO), Ambuja Cements Limited (ABUJ.BO), Coal India (COAL.BO), Grasim Industries Ltd (GRAS.BO), Hindalco Industries (HALC.BO), JSW Steel (JSTL.BO), NMDC (NMDC.NS), National Aluminium Co Ltd (NALU.BO), Sesa Goa (SESA.NS), Steel Authority of India Ltd (SAIL.BO), Sterlite Industries (STRL.BO), Tata Steel Ltd (TISC.BO), UltraTech Cement Ltd (ULTC.BO) J.P. Morgan Equity Research Ratings Distribution, as of March 30, 2013
J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 43% 54% 42% 74% Neutral (hold) 44% 47% 50% 64% Underweight (sell) 13% 38% 9% 57%

*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

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Pinakin Parekh, CFA (91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Asia Pacific Equity Research 24 May 2013

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