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LKP Securities
Kirloskar Ferrous Ind (Buy)
CMP: ₹63.8
Target: ₹120
FY20 performance of Kirloskar Ferrous Industries reflects the renewed focus on profitability emanating from higher process efficiencies both in castings & pig iron, reduction in cycle time of castings, reduced rejection rates and power cost savings. What is also interesting to observe is the fact that most of these metrics can keep improving and much of these are recurring in nature.
Higher share of machined castings (value addition higher than pig iron) going forward coupled with higher captive power generation from the coke-owen plant and waste heat recovery should improve profitability going forward as KFIL meets a large part of castings demand from the buoyant tractor industry.
Acquisition of the two mines in Karnataka should in our view help reduce iron ore cost going forward once clearances are obtained.
Asset-rich Kirloskar Ferrous Industries has a strong balance sheet and is professionally mManaged by RV Gumaste with the ability to fund its backward and forward linkages through internal accruals.
KFIL is trading at compelling valuations and has the potential to double in the next 15 months.
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