Tata Metaliks - Rs.150.00

Incorporated in 1990 and promoted by TISCO, Tata Metaliks manufactures foundry grade pig iron through the mini blast furnace route. Its products are used mainly by foundries for manufacturing automobile castings, industrial castings, pipes and others. The company has an agreement with Tata Korf Engineering Services for technical know-how and consultancy and the company has been following the Tata Business Excellence Model (TBEM) since 1999. Due to its cost competitiveness and other initiatives, it is the lowest cost producer of Foundry Grade pig iron. The company has started producing customized pig iron as per the technical requirements of users along with value added specialized products like high silicon pig iron etc., which have a good export market. Pig Iron prices are still ruling very high and will remain firm as the domestic demand is set to grow on the back of rising demand from auto ancillary and engineering sectors.

The company is putting up a new 1,00,000 TPA blast furnace at Kharagpur, which will take its total capacity to 2,63,000 TPA and is expected to become operational this month. Also, to minimize the adverse impact of the steep hike in the price of imported LAM Coal and Coke, the company has made arrangements for domestic conversion of imported Coal and blending the same with indigenous Coke. It has also decided to install its own non-recovery type of Cokery of 60,000 TPA inside the plant to meet 25 per cent of its total requirement and is examining opportunities to acquire some cokeries. Interestingly, it has applied for mining rights in the neighbouring iron ore rich belt. It is also planning to apply for a coking-coal block. For future growth, it even wants to go in for downstream integration with castings, special steels etc. To gear-up export revenue, the Business Development Group of the Company has taken initiatives to spread its foot print especially in South- East Asia, South-Korea & Japan and in other niche markets like Egypt and Dubai.

Due to capacity expansion and higher price realisation in the first half, its net sales more than doubled to Rs137 cr. whereas its NP jumped 270 per cent to Rs36 cr. in spite of very high tax provision. Its OPM improved substantially to 43 per cent from 25 per cent last year. And since its new unit is expect to start this month, it will post impressive numbers in the second half also. The company is almost debt free with no Long Term or Short Term borrowing. To share its growth story, it may declare Rs6~7 per share as dividend for FY05. Considering all these factors, the company should report a NP of Rs70 cr. on turnover of Rs310 cr. registering an EPS of Rs28. Investors are advised to buy on dips or in sharp corrections only with a long term perspective. This scrip has the potential to double in 18 months time.