Centrum Broking

Tata Metaliks (Buy)

CMP: ₹692.80

Target: ₹890

A subsidiary of Tata Steel, Tata Metaliks has its state-of-the-art manufacturing plant at Kharagpur, West Bengal, which produces the finest quality of pig iron and ductile iron (DI) pipes in India. The plant’s annual hot metal production capacity is 5 lakh tonne out of which 2 lakh tonne is converted into DI pipes and 3 lakh tonne into pig iron.

Tata Metaliks Ltd (TML) delivered strong performance in Q4 despite headwinds of higher RM costs which was mitigated by superlative performance from DI segment. Exciting future growth prospects await TML’s fast growing business of DI pipes which boasts of industry leading cost structure, solid demand drivers and strong entry barriers. With recent commissioning of growth-accretive and cost-efficient projects offering quick paybacks, TML is set to take the next leap in profitability and deliver EBITDA/PAT CAGR of 32 per cent/41 per cent over FY17-19E. Despite the recent strong up move, we see valuations reasonable leaving scope for re-rating.

Key risk: Margin pressure due to forex losses and raw material volatility.

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