Buy Recommendation - Tata Sponge

Keep buying on Tata Sponge Iron with a target price of Rs 294.The sponge iron scenario looks quite lucrative relying on the ever increasing demand for steel and higher impetus to the infrastructural de-velopment by the government. The company has been working on its expansion plans and is well placed in Orissa with access to all the raw materials required. With an expectation of continuance of the price robustness witnessed in sponge iron in the last 12 months, the company shall be able to couple higher realizations along with higher sales.

The stock at the current market price of Rs 245 will trade 3.95 times to its earning per share of Rs 62.03 and will trade 1.49 times to its book – value of Rs 164.87. The stock looks attractive at the current valuation with the strong upside potential in the medium term investment horizon.