Analysts' Picks: Adunik Metaliks
India Infoline recommends a 'buy' rating on Adhunik Metaliks (AML) with a target price of Rs 244 per share, implying an upside of 121.4%.
ADHUNIK METALIKS
RESEARCH: INDIA INFOLINE
RATING: BUY
CMP: RS 114
India Infoline recommends a 'buy' rating on Adhunik Metaliks (AML) with a target price of Rs 244 per share, implying an upside of 121.4%.
In Q1 FY09, AML reported strong results. Its trading income fell 8.2% y-oy to Rs 56.3 crore from Rs 65.8 crore in Q1 FY08. The share of trading income to total sales in Q1 FY09 reduced to 15% from 29% in the corresponding quarter last year.
The rise in PAT growth was curtailed by a jump in interest and depreciation costs. In the second half of FY08, the company had raised debt to fund its expansion plans.
This pushed up its interest cost 77.4% y-o-y to Rs 22.5 crore. With the new steel melting shop operational in Q3 FY08, depreciation for the company increased 49.3% y-oy to Rs 7.4 crore. PAT stood at Rs 23.5 crore in Q1 FY09, compared to Rs 17.8 crore in Q1 FY08, and was a mere 7.5% higher than Rs 21.9 crore in Q4 FY08.
During the past two years, AML has been in a major expansion phase. It is not only increasing its steel-making capacity, but is also going up the value chain. AML is doubling its sponge-iron and billet-making capacity. The expansion is being done in two phases.
In the first phase, it is increasing its billet-making capacity to 0.45 mtpa, and setting up a rolling mill of 0.1 mtpa and a ferro-chrome plant of 37,760 tpa.
India Infoline has valued AML based on the sum-of-parts method, which is primarily based on the EV/EBITDA multiple for its steel and mining business and discounted cash flow for its power business. Based on 4.5x FY10E EV/EBITDA for the Rs 680-crore steel and mining business, India Infoline has arrived at a fair value of Rs 209 per share.
RESEARCH: INDIA INFOLINE
RATING: BUY
CMP: RS 114
India Infoline recommends a 'buy' rating on Adhunik Metaliks (AML) with a target price of Rs 244 per share, implying an upside of 121.4%.
In Q1 FY09, AML reported strong results. Its trading income fell 8.2% y-oy to Rs 56.3 crore from Rs 65.8 crore in Q1 FY08. The share of trading income to total sales in Q1 FY09 reduced to 15% from 29% in the corresponding quarter last year.
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The rise in PAT growth was curtailed by a jump in interest and depreciation costs. In the second half of FY08, the company had raised debt to fund its expansion plans.
This pushed up its interest cost 77.4% y-o-y to Rs 22.5 crore. With the new steel melting shop operational in Q3 FY08, depreciation for the company increased 49.3% y-oy to Rs 7.4 crore. PAT stood at Rs 23.5 crore in Q1 FY09, compared to Rs 17.8 crore in Q1 FY08, and was a mere 7.5% higher than Rs 21.9 crore in Q4 FY08.
During the past two years, AML has been in a major expansion phase. It is not only increasing its steel-making capacity, but is also going up the value chain. AML is doubling its sponge-iron and billet-making capacity. The expansion is being done in two phases.
In the first phase, it is increasing its billet-making capacity to 0.45 mtpa, and setting up a rolling mill of 0.1 mtpa and a ferro-chrome plant of 37,760 tpa.
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India Infoline has valued AML based on the sum-of-parts method, which is primarily based on the EV/EBITDA multiple for its steel and mining business and discounted cash flow for its power business. Based on 4.5x FY10E EV/EBITDA for the Rs 680-crore steel and mining business, India Infoline has arrived at a fair value of Rs 209 per share.
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