Bhushan Steel - Rs.132.00

Starting in 1989 with a turnover of 50 cr, today Bhushan steel a 2500 cr company has emerged as a third largest producer of cold-rolled products manufacturing wide range of value added products like Wide CR, Galvanised and colour coated Sheets, High Tensile Steel Strapping , Hardened & Tempered Strips and Precision Tubes. It enjoys a dominant position in high margin automobile & white good sector and is the single largest supplier to them with 60% market share. Company has been recognised by Ford and Honda Motors as their Global Resource Centre for their worldwide operation which is a big achievement in itself. Its technical collaboration with Sumitomo Metal Industries Japan, one of the largest global steel producers has been extended for another six years. Management understands the importance of technology and all its plants are upgraded & equipped with latest machines supplied by global leaders like Hitachi, Ebner, Fimi, MAN B&W, Clecim etc and enjoys ISO 9002 & QS 9000 certification. No wonder its clientele consist of reputed and eminent corporates like Tata Motors, M&M, Maruti Udyog, Bajaj Auto, LG, Samsung, Godrej, Videocon, BHEL, L&T, Whirlpool, Ford, IFB, Daewoo, Electrolux, Carrier etc.

Companys manufacturing plant is spread across Shahidabad with a capacity of 5,00,00 TPA and at Khopoli with a capacity of 4,00,000 TPA. Infact its state-of-the-art Khopoli plant started full operation only in Jan 2004. This plant will operate as a single point source for almost all value added products and will help the company to strengthen its grip on the Western & Southern market. To continue its growth path and also in order to become self reliant and have control over its raw material, the company has proposed to set up an integrated steel project of 3200 cr capex with a capacity of 12,00,000 (1.20 mn) TPA of Hot rolled coil & 3,00,000 TPA of long products and power plant of 110 MW in the state of Orissa. The project will be set up in modular format where part facilities would be set up during implementation and start generating cash accruals. Company has already identified land in Dist. Dhenkanal in the state of Orissa and has also signed MOU with Government of Orissa for allocation of Iron ore and coal mines. Though it’s a long term plan but with this Bhushan Steel will become a fully integrated company from iron ore to finished steel products.

Fundamentally & financially also company is strong and doing well. For the half-year ended September 2004, it posted an increase in net profit of 100% to Rs 68 crore on a net sales growth of 82% to Rs 1187 crore. Exports posted a jump of 184% to Rs 341 crore enjoying 27% share of gross sales. For FY05 it is targeting an export of 800 cr to 40 countries of which export to China will be 25%. With the high growth witnessed in the automobile, white goods and construction sector, and companys thrust on export and improving efficiency we expect it to register an sales of 2450 cr and NP of 140 cr So with an expected EPS of 35 Rs and CEPS of 75 Rs its trading very cheap at current price. Notably it has huge reserve of 550 cr on current equity of 40.50 cr leading to a book value of 145 Rs. Though equity dilution is there on its cards to fund the Orissa project but we done expect it to happen in this fiscal. Hence investors are advised to buy at current price for 50% appreciation i.e. price target of 200 Rs in next 12 months.