indiabull
21-11-2007, 07:12 AM
PINC Research has recommended a ‘Buy’ on Jai Balaji Industries for target price of Rs 350 in 12 months. At current market price of Rs 310, the share trades at price to earnings of 7.5 and EV/EBDIT of 5.4 times 2008-09, without considering benefits that will accrue from captive mines allocated to Nilachal Iron & Power.
In comparison, peers Adhunik Metaliks, Monnet Ispat & Energy and JSPL trade at 9-10 times 2008-09 earnings.
Jai Balaji is in the midst of huge expansion plan, which involves capital expenditure of Rs 830 crore. The project involves setting up of 2x250m3 blast furnace, a 60 tonne electric arc furnace, 545k mt sinter plant, 2x16.5 MVA ferro alloy furnace, 180k mt rolling mill and a 40 MW power plant. The first blast furnace started in April this year and the 180k mt rolling mill also commenced operation in April-June, having capacity of 300 k mt.
Upon completion of current capex, Jai Balaji would emerge as one of the largest integrated steel players in India having capacity of 1 million metric tonne. The company plans to set up a 1.1 million metric tonne pelletisation plant, a coke oven battery of 400k mt and a rolling mill of 180k metric tonne. Also, acquisition of coal & coking coal mine has the potential to substantially lower its cost of production.
Thus, Jai Balaji has high potential to improve on margins consistently for 3-4 years and ability to have a flexible product mix between mild & alloy steel.
PINC expects Jai Balaji to post sales of Rs 1,300 crore and Rs 2,000 crore in 2007-08 and 2008-09 respectively. Operational profit margins should be 20 per cent and 21 per cent with net profit of Rs 100 crore and Rs 190 crore respectively.
The July-September quarter results for 2007-08 were in line with PINC’s expectation, considering the merger with Shri Ramrupai Balaji Steel Ltd.
Following the merger, production volumes of the company increased substantially during the quarter. However, 33 per cent of the company's revenues in April-September came from fringe activities like renting railway rakes and sale of steel and ferro alloy waste. Although these have low margins, they still add to cash flows while the expansion projects are under implementation.
These activities would reduce once the expansion project gets commissioned and all facilities start operating at full capacities
ET
In comparison, peers Adhunik Metaliks, Monnet Ispat & Energy and JSPL trade at 9-10 times 2008-09 earnings.
Jai Balaji is in the midst of huge expansion plan, which involves capital expenditure of Rs 830 crore. The project involves setting up of 2x250m3 blast furnace, a 60 tonne electric arc furnace, 545k mt sinter plant, 2x16.5 MVA ferro alloy furnace, 180k mt rolling mill and a 40 MW power plant. The first blast furnace started in April this year and the 180k mt rolling mill also commenced operation in April-June, having capacity of 300 k mt.
Upon completion of current capex, Jai Balaji would emerge as one of the largest integrated steel players in India having capacity of 1 million metric tonne. The company plans to set up a 1.1 million metric tonne pelletisation plant, a coke oven battery of 400k mt and a rolling mill of 180k metric tonne. Also, acquisition of coal & coking coal mine has the potential to substantially lower its cost of production.
Thus, Jai Balaji has high potential to improve on margins consistently for 3-4 years and ability to have a flexible product mix between mild & alloy steel.
PINC expects Jai Balaji to post sales of Rs 1,300 crore and Rs 2,000 crore in 2007-08 and 2008-09 respectively. Operational profit margins should be 20 per cent and 21 per cent with net profit of Rs 100 crore and Rs 190 crore respectively.
The July-September quarter results for 2007-08 were in line with PINC’s expectation, considering the merger with Shri Ramrupai Balaji Steel Ltd.
Following the merger, production volumes of the company increased substantially during the quarter. However, 33 per cent of the company's revenues in April-September came from fringe activities like renting railway rakes and sale of steel and ferro alloy waste. Although these have low margins, they still add to cash flows while the expansion projects are under implementation.
These activities would reduce once the expansion project gets commissioned and all facilities start operating at full capacities
ET