PINC puts buy on Visa Steel; target Rs 85
PINC Research has reiterated ‘buy’ on Visa Steel for a one year target price of Rs 85. The company currently manufactures pig iron, coke and ferro chrome with capacities of 225k, 400k and 50k respectively.
Visa Steel has production facilities in Kalinganagar and Golagaon in Orissa. Its capacities include 225k tpa of pig iron, 400k tpa of coke and a 50k tpa ferro chrome unit. Currently, MBF is under a maintainence shutdown for relining and should be operational by Jun’08.
The company is setting up a 500K tpa fully integrated special & stainless steel plant at an outlay of Rs 1,150 crore. This will be funded through debt of Rs 750 crore, IPO proceeds of Rs 200 crore and internal accruals.
The above capital expenditure also envisages setting up a 300k tpa sponge iron facility and 75 MW (3*25) waste heat recovery power plants. The sponge iron and 50MW facility is expected to be commissioned in April-June 2008-09, while the last 25MW will be commissioned in 2009-10.
Visa Steel has been allotted a coal block in Patrapara (Talcher, Orissa) and is in process of being allotted a captive iron ore mine. While its chrome ore requirement would be met by Ghotringa Minerals (89% subsidiary), its coking coal needs will be met through long term contracts with Millennium
At the market price of Rs 48, the stock trades at a P/E of 2.8x and EV/EBITDA of 3x 2009-10 estimated earnings of Rs 16.9. PINC believes these valuations do not factor in a buoyant pricing environment for ferro alloys and coke. Moreover, the upcoming captive linkage for raw materials will improve operational efficiencies. Also, the special and stainless steel plant will provide a new dimension to the business model.
No comments:
Post a Comment