Rohit Ferro-Tech Ltd - 35.00 Rs

Promoted by Mr. Suresh Kumar Patni, Rohit Ferro-Tech Limited (RFTL) was incorporated in April 2000 and is engaged in manufacturing, trading, import & export of various kinds of ferro alloys. It belongs to the well known IMPEX group which has more than two decades of experience in the ferro alloy, sponge iron, steel and also manages Impex Ferro Tech, Ankit Metal & Power etc. Today, RFTL is a leading producer of high carbon ferro chrome apart from manufacturing ferro manganese and silico manganese through submerged arc furnace route. Ferro alloys are primarily used in steel making as an additive to add strength and quality required in a particular grade of steel like stainless steel etc. Nearly 40% of total revenue comes from export to countries like China, Japan, Korea, Taiwan, Turkey, Abu Dhabi, Germany, Mexico, Greece etc.

RFTL’s main plant is located at Bishnupur, WB with a production capacity of 40,000 MT of only high carbon ferro chrome. Few months back, it installed a fourth furnace thereby enhancing the capacity to 55000 MT. It is further setting up a fifth furnace with 15000 MT capacity which will start operation by end of this calendar year. From the IPO proceeds last year, company has set up a green field plant in Jajpur, Orissa with an installed capacity of 25,426 TPA of silico manganese, 52124 TPA of high carbon ferro chrome and 35,947 TPA of ferro manganese. Notably, all the furnaces can be used interchangeably for producing any of these products. However, the commercial production from this plant started only in Dec 2006. So as on today its total production capacity stands at 1,65,000 MTPA which will get augmented to 1,80,000 MTPA by Dec 07. As a step towards backward integration, RFTL has applied for mining lease to the state government of Orissa for chrome ore as well as manganese ore which are located within a radius of 50 Kilometers from its Jajpur plant. Besides, in order to reduce the power cost, company may put up its own thermal based captive power plant in future. For international marketing, it intends to have a warehouse at Rotterdam to cater the demand of European countries.

For the March quarter RFTL reported terrific nos as sales shot up by 135% to 78 cr whereas NP zoomed up to 6 cr against 1 cr last year. For the full year it recorded 60% rise in sales to 199 cr and NP increased by 75% to 19 cr. Hence it clocked an EPS of 5.50 Rs on equity of 34.50 cr for which it gave 10% dividend. Interestingly, these figures are achieved against the total estimated production of around 60,000 tonne for FY07. But due to recent expansion it may produce around 1,20,000 tonne for current fiscal which means 100% growth in volume terms. Therefore for FY08, it is expected to clock a turnover of 350 cr and PAT of 35 cr i.e. EPS of 10 Rs on current equity. Considering its issue price at 30 Rs in March 2006 and with 52 week H/L as 59 / 24 Rs the margin of safety is high. Moreover, scrip is trading cum dividend with a yield of nearly 3% at CMP. To conclude, investors are recommended to buy at current levels with a price target of Rs 50/- (i.e.40% appreciation) in 9~12 months.