Religare assigns ‘buy’ to Adhunik Metaliks
Religare has initiated coverage on Adhunik Metaliks with a buy recommendation for a target price of Rs 246.
By INDIATIMES NEWS NETWORK |
MUMBAI: Religare has initiated coverage on Adhunik Metaliks with a buy recommendation for a target price of Rs 246.
Adhunik Metaliks supplies specialised steel and value-added components to the auto, power, defence and engineering sectors. The company is in the midst of a Rs 440-crore capital expenditure programme which will transform it into a fully integrated steel manufacturer.
The company has increased its steel-making capacity 80 per cent to 450,000 mtpa, with value-added alloy and stainless steel products being introduced.
Change in product mix with the inclusion of stainless steel rolled products would boost average realisation and enable the company to tap the rising demand for alloy and stainless steel in India.
EBITDA margin is set to expand in 2008-09 due to higher captive power generation, stronger product mix and use of captive iron ore mines. Further, margin improvement is likely in 2009-10 once captive coal mines are tapped.
Acquisition of Orissa Manganese and Mineral will result in significant bottomline growth in 2008-09. Orissa Manganese possesses proven reserves of 35million tonne of manganese ore and 15 million tonne of iron ore, which the company has begun to sell in the highly buoyant open market.
Adhunik also acquired Pune-based V-cube Forge this September. V-cube manufactures forged and machined parts for the automobile, railway and aerospace sectors.
Unistar Galvanisers and Fabricators, a 100 per cent subsidiary of Adhunik, has bagged Rs 53 crore order from India Wireless Technology. Unistar plans to reach a production target of 3,500 MT per month of transmission towers by December.
Transmission tower business is on a strong growth trajectory, led by demand in power and telecom sectors and an existing solid client base.
The target price comprises of Rs 64.5 per share for the standalone business based on 5.5 times 2008-09 estimated EV/EBITDA, and Rs 181 per share for the mining business using the Vedanta Resources-Sesa Goa deal as a benchmark.
Adhunik Metaliks supplies specialised steel and value-added components to the auto, power, defence and engineering sectors. The company is in the midst of a Rs 440-crore capital expenditure programme which will transform it into a fully integrated steel manufacturer.
The company has increased its steel-making capacity 80 per cent to 450,000 mtpa, with value-added alloy and stainless steel products being introduced.
Change in product mix with the inclusion of stainless steel rolled products would boost average realisation and enable the company to tap the rising demand for alloy and stainless steel in India.
EBITDA margin is set to expand in 2008-09 due to higher captive power generation, stronger product mix and use of captive iron ore mines. Further, margin improvement is likely in 2009-10 once captive coal mines are tapped.
Acquisition of Orissa Manganese and Mineral will result in significant bottomline growth in 2008-09. Orissa Manganese possesses proven reserves of 35million tonne of manganese ore and 15 million tonne of iron ore, which the company has begun to sell in the highly buoyant open market.
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Adhunik also acquired Pune-based V-cube Forge this September. V-cube manufactures forged and machined parts for the automobile, railway and aerospace sectors.
Unistar Galvanisers and Fabricators, a 100 per cent subsidiary of Adhunik, has bagged Rs 53 crore order from India Wireless Technology. Unistar plans to reach a production target of 3,500 MT per month of transmission towers by December.
Transmission tower business is on a strong growth trajectory, led by demand in power and telecom sectors and an existing solid client base.
The target price comprises of Rs 64.5 per share for the standalone business based on 5.5 times 2008-09 estimated EV/EBITDA, and Rs 181 per share for the mining business using the Vedanta Resources-Sesa Goa deal as a benchmark.
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