Electrosteel Castings

This is what I found on net regarding Electrosteel Castings and looks quite interesting.
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Calcutta based Electrosteel has become a play on three minerals :Coal, Iron Ore and Manganese and Pure Infrastructure play by virtue of its Expansions into Steel, Power Generation and Water Transport.


The bigger global miner BHP Billiton has forecast the commencement of a Super-Cycle in Coal and Iron-a key beneficiary in India would be the Rs 1200 crore Ductile Iron Pipe manufacturer Electrosteel Castings.


While the Corporate fetches a market cap of Rs 1600 crore at present, the Non Coking Coal and Iron Ore Reserves under its belt are worth Rs 108,000 crore.


Discount these Reserves by what-ever measure and we are talking of a phenomenal change in scale and valuations for Electrosteel Castings.


I.Electrosteel Castings-Backward Integration


A.Coking Coal Blocks Parbatpur, Bokaro (Jharkhand)


-Work on under ground mines started, production to commence by mid FY08.
-Certified Reserves-225 million tonnes
-Valued at Rs Rs 87750 crore
(at current price of $ 100 per tonne and conversion rate of $ 39 per US dollar)
-Estimated Life: 100 years (will change with recovery and annual drawals).
-Capital Cost : Rs 350 crore
-State Royalty: Rs 25 per tonne
-Extraction Costs: $ 28 per tonne or approximately Rs 1100 per tonne
-Normalised RNOA: 48 per cent


B.Iron Ore Block, Kodilabad (Jharkhand)


-Open Cast mines, Work Commenced
-Estimated Iron Ores Reseves (FE>65) 100 Million Tonnes
-Valued at Rs 20000 crore
(100 MT @ $ 50 per tonne and Conversion at Rs 39 to a US Dollar)
-Capital Cost Rs 150 crore
-Production Commences by early FY09
-Estimated Mine Life 60 years (Will change with recovery & annual drawals)


Production of Coking Coal and Iron Ore from dedicated mines will bring operational economies to Electrosteel Castings leading to a sharp rise in profits by FY09.


II.Electrosteel Integrated


A 60:40 SPV set up Electrosteel Castings with an Investment of Rs 5 bn will be setting up a 1.2 million tpa Integrated Steel Plant and a 1200 MW Thermal Plant by FY 2010, costing about Rs 10,000 crore.


Dedicated Thermal Coking Coal mines at North Dhadhu with estimated high grade Coal Reserves of 190 Million tonnes have not been considered in the above forecasts but form a part of the $ 2.5 bn expansion cost.

*AND*

Angel Broking has maintained buy rating on Electrosteel Casting with 12 month target price of Rs 107 in their 14 December 2007 report.

"Electrosteel Castings (ECL) is a complete water infrastructure company providing end-to-end solution in water supply & sewerage application systems. We believe that capacity expansion for DI pipes and backward integration into achieving self-sufficiency of key inputs like coking coal and iron ore are the key drivers of growth for ECL going ahead. We expect ECL to record a 30% CAGR in Bottom-line over FY2007-10E. At the CMP of Rs 82, ECL is trading at a P/BV of 1.4x FY2010E BV. However, excluding ECL's 48.5% investment in Lanco Ferro, the stock is available at P/BV of 1.3x FY2010E BV. We have valued ECL's 48.5% stake in Lanco Ferro at Rs4/share on current market capitalisation after giving 25% discount. We have valued ECL's business at Rs 103/share at which it would command a P/BV of 1.8x, which we believe is fair considering peer valuations and the company's improving business profile. We Initiate Coverage on the stock, with a Buy recommendation and 12-month Target Price of Rs 107 (incld. Lanco Ferro), giving an upside of 30%," According to Angel Broking report.

Stock Gurus please post your comments.
-Debdeep

You have given 12 month target price of 107 Rs. Is it by mistake. If so what is the true potential of this stock. What could be the actual 1 year target for this stock.

Dear nansrired,
It's not my target , as I mentioned it's the target specified by Angel Broking on their report on 14 December 2007. By the way when they published the report the stock was trading at around 85.5. I think they expected 25% upmove for this stock in one year. But as we can see today it closed at 97 which means it has given 13.45% return after 12 trading days which signals a stong buy on this counter.
Thanks,

ST Target will be around 115

What is the potential of this stock. what is the 1 month target