Recommendation: Buy
Current price: Rs 24 (at the time of publishing this tip)
Target price: Rs 40
Key points:
- Usha Martin Ltd (UML) put up a satisfactory performance amid an environment of global slowdown in a tough Q3FY09. The numbers were in line with the expectations, mainly because of falling sales volumes and lower realisations during the quarter. Net profit for the quarter stood at Rs 39.06 crore, down 5.3% YoY and 25.4% QoQ. Value-added products and a presence in niche markets helped the company offset the effect of lower realisations to some extent.
- The consolidated net sales decreased to Rs 738.33 crore, a growth of 32.98% YoY and a drop of 8.44% QoQ mainly on account of decreased realisations across all the product categories. The EBITDA margin stood at 17.05%, a drop of 132 bps YoY and 73 bps QoQ due to lower product realisations and high coke cost (already sourced at higher prices in earlier quarters) on the raw
material front. - Important stock data: Market Cap Rs 577.07 Cr; Debt (FY08) Rs 1137.46 Cr; Cash (FY08) Rs 108.14 Cr; EV Rs 1606.39 Cr; BV (FY08) Rs 37.29; 52 Week H/L Rs 108/18; Equity Capital Rs 25.09 Cr; Face Value Rs 1.00; MF Holding 11.4%; FII Holding 20.75%
- At the current price of Rs 23, the stock is trading at 2.5x FY10E consolidated EPS of Rs 9.2.
- I am a strong believer of this stock and hence would recommend a Buy call with a price target of Rs 40 over next 7-8 months.
