Balasore Alloys: Raising Star 2

By -
Company Name: Balasore Alloys

Industry: Iron & Steel (Ferro Chrome)

Investment Horizon: Holding for 2 Years (This may not generate immediate return in the short term)

Recommendation: At CMP of 47 is a good price. Can enter on dips too (This may not generate the immediate return in the short term)

About the Company:

Balasore Alloys, formerly Ispat Alloys Limited is part of the renowned Ispat group of Companies, a major business house in the country, promoted by the Mittals. The group's companies are spread across several countries besides India.

Balasore Alloys was incorporated in the year 1984 at Balasore, Orissa and at present it has 5 furnaces with total capacity of 57 MVA to produce 95,000 MT bulk Ferro Alloys per annum
The company has captive mines in different locations like Chromite ore mines in Sukinda Valley at Jajpur Road (Orissa)



About the Industry – Already shared on Indian Metals (Both are same industry)

Pros:
  • Global Investment bank JP Morgan is bullish on Steel sector for the next 3 years
  • As incremental demand continues to outstrip capacity, we expect industry utilization to hit 86 percent by FY21, a ten-year high and stabilisation of prices,” it added
  • ‘Make in India’ holds great promise for the manufacturing sector in general
  • As per the Indian Mining Ministry, the chrome ore output for Q4 2015-16 increased by 100% last QoQ to 1.03 million tonnes and 18% over the corresponding period in the previous year. India is aiming to increase production of minerals including chrome ore by inviting private sector and foreign companies to take part in exploration projects
  • With the Current Valuations, it has a Margin of Safety of 40% from 52 week High
  • (The Overall Industry itself is undervalued)
  • Promoters are increasing their stake
  • Robust growth in terms of both top line and bottom-line in the recent quarters (35% and 100%)
  • Rise in Ferrochrome prices Rs.56,000/tn to Rs.1,07,000/tn and the Analysts believe the prices will continue to remain high for some time. This rise in prices can be attributed to inventory shortage in China, So they are accepting Ferrochrome even at higher prices (Simple concept Demand is increasing, while the supply is not enough to meet the demand which increases the prices—Concern is How far the increased prices sustain)

 Cons:
  • Lowering of Chinese economy impact growth prospects, global demand is not much attractive at the moment.
  • Limited reserves of chrome ore
  • Promoters have pledged the shares up to 35%
  • Company has delivered poor growth of 6% in terms of revenues over past 5 years
  • Low return on Equity of 10% for last 3 years

 Financial Highlights:
  • Net Sale per share is at Rs.130 (as per FY 17 data)
  • Book value of the company is Rs.57 (So it is trading at 0.8 time book value)
  • The Company’s debt is at Rs.131 crores and Profit after tax for FY 17 stood 90 crores, so the debt is just 1.4 times the profit.
  • Operating Margins are improved to 26% from 18%
  • Dividend pay-out is at 25%
  • 80% of its revenues come from exports
  • It is trading at P/E of 4.7 compared to the other players P/E of  14-17

Narration
2012
2013
2014
2015
2016
2017
Sales
     590.70
     686.13
     782.61
     847.85
     837.97
  1,036.08
Expenses
     485.74
     590.24
     659.94
     783.04
     755.95
     833.23
Operating Profit
     104.96
        95.89
     122.67
        64.81
        82.02
     202.85
OPM
        17.77
        13.98
        15.67
          7.64
          9.79
        19.58
Net profit
        31.93
        28.78
        46.00
        29.24
        18.69
        89.51
EPS
          4.74
          4.27
          6.83
          3.95
          2.28
        10.07
Price to earning
          3.39
          2.58
          2.07
          4.43
          7.76
          4.74
Price
        16.08
        11.01
        14.11
        17.53
        17.70
        47.75

Rating:

  • Technical rating: 63
  • Fundamental rating: 57
  • Overall rating: 60


Valuations:

With the investment horizon given, considering all the inputs of estimates the valuations are at Rs.216

Valuations are made at 11X projected FY 19 EPS

If the prices sustain in future also, then margins will increase with increase in revenues too. Then no one can stop this raising star

(The valuations are calculated on the basis of financial inputs/estimates but investors are required to invest based on the business potential and business risks too) 

ANNUAL REPORT FY 16
Jump in FC prices - ET

Comments

Post a Comment

Popular posts from this blog

Prolife Industries...Niche industry ...a Potential Multibagger

By -
Prolife Industries CMP: 159.7 Current market cap: 63 Cr  1. Company engaged in mfg of Dyes, Pigments, pharma and agro chemicals 2. After the demise of previous MD, his son taken over the responsibility of MD – He is just 28 years old but has extensive experience in R & D 3. Future growth a. Mgt planning for 150-200 Crs topline as the company invested in capex in the last 3-5 years from their cash flows b. New products added with better margin joining i. Violet acid which has world wide demand – they are tapping eurpoean markets ii. Very few players in producing this iii. Continous spending on R&D and getting c. Superb ROCE maintaining above 25% d. Fantastic cash management – entire cash cycle is less than a month e. With a net margin of 20-25 crs and higher ROCE, it can demand higher multiples of 40 times and can be a 1000 cr enterprise value (bcoz of net debt free too) 4. Deployed experienced mgt across different countries to grab more export share 5. Managemente is highly spe
Read more

This Pharma Stock has potential to generate 100% Return in Short term

By -
Image
In the current market scenario, the market is in downtrend and many have sectors have underperformed So one has to chose the selective sectors which are defensive enough to their portfolio So Pharma would be one sector which can help to stablize your portfolio becuase many global factors are positive for this Industry due to recent Covid-19 issue What happended to pharma industry till now?? The Pharma Index has been consolidating for almost 5 years till now, let me show you some numbers So in the above image its clear that, the pharma index has made multi year top in April 2015 at 14000 levels and now its trading at 8412 From the above, its giving breakout on monthly charts which means now entering into  bull phase back with a logical reason Coming back to the company The company which i am disussing now is Cadila Health Care .  Now Its trading at 350 levels Let us discuss some facts and interesting points about Cadila Health Care for investment purpose
Read more

How to Start Forex Trading for Beginners 2020

By -
Image
                       Forex trading is one of the largest market in the world with almost $5 trillion daily volume when you compare with the equities, it is just $85 billion and US Treasury market is $550 billion. So it is bigger than the US equitues and Treasury markets put together Where do these Forex markets operate?  We have different stock exchanges for equities like New york stock exchange, London stock exchange, Bombay Stock exchange located at their respective cities.  But for Forex - there is no physical location! You heard it right. There is no central location for Forex market, it is only the global electronic network of banks, financial brokers, financial institutions and traders who buy and sell currencies  When do these Forex markets operate? One of the interesting future for Forex market is it operates 24 hours a day except on weekends Let us consider Asia/Kolkata as the base time, becuase when i start trading from India I usually wait for US market to open  So it usua
Read more

4 Tips for setting up a Good Forex trading System

By -
Image
  One thing that comes to our mind while we are trading Forex is - Do we have a right trading System The point to be noted here is Does all right trading systems makes money. If it is so then the same will be followed by everyone which will lapse the opportunities in the market When i was starting a business, a wise man told me every step you take will have impact on your business and its growth. So take all the inputs provided by others and make a informed decision. The same thing can be even applied for Trading too, You can not blindly trade on others suggestions. One should create their own Forex trading system So Firstly you are still confused about what is a trading system? Ya, Let me give you the basic outline about trading system - It could be defined as a set of rules based on which you take a trade Example: I have a trading system which says that you have to buy only when this particular technical indicator gives  a buy signal On a broader level, let us classify that into 3 fa
Read more