National Steel & Agro Industries - Rs.27.00

National Steel and Agro Industries Limited (NSAIL), formerly known as National Steel Industries Limited, was set in January 1985 with the objective of manufacturing Galvanized Plain Steel Coils, Galvanized Plain Steel Sheets and Galvanized Corrugated Steel Sheets. It was set up in technical collaboration with three global majors: CMI of Belgium, Phoenix of Belgium and Stain Hourte of France. It manufactures ultra thin gauge GP and GC sheets for use in roofing, defence, construction, automobile and white goods sector under the brand name `Appu'. In 1992, NSAIL integrated backward by setting Cold Rolling (CR) Mill and starting a 25 MW Power Plant adjacent to its existing steel complex in order to meet the rising demand for power. NSAIL belongs to the renowned Ruchi group promoted by the Shahra family.

Its manufacturing plant is located at Sejwaya, in Dhar district of Madhya Pradesh with an installed capacity of 1,40,000 TPA for GP & GC coils/sheets and 1,20,000 TPA for CR coils as on 31 March 2004. Due to the increasing demand and higher price realization, the company is undergoing expansion to enhance the galvanized steel capacity to 2,00,000 TPA and CR steel capacity will double to 2,40,000 TPA at the end of this financial year itself. The company also plans to set up a most modern state-of-the-art colour coating line which will produce a sophisticated and an unlimited range of coloured steel with high corrosion resistance and excellent aesthetics for use in a variety of industries such as buildings, hotels and the automotive sector.

With strong international demand and better margins, NSAIL is putting more thrust on exports and is currently exporting to South East Asia, African countries, Middle East, USA, China and to other neighbouring countries. FY05 ~ 06 will be the best year for NSAIL as it will see the full impact of expansion and higher price realisation. The company’s share price is poorly discounted by the market due to its very low OPM of 3 ~ 4% and NPM of 1 ~ 2%. Though the government has increased the excise duty on steel back to 16% from 12% plus and raw material cost continues to rise, the company’s margin are set to improve due to economies of scale and other value additions. The company is also expected to declare 5% dividend for FY05. It has huge reserves of more than Rs100 cr. on equity of Rs32 cr. which leads to book value of around Rs41. Considering all the factors, it is expected to close FY05 with a turnover of Rs1425 cr. and NP of Rs16.50 cr. reporting an EPS of Rs5 which can increase to Rs8 in FY06. Investors can buy this share as it has the potential to appreciate by 50 per cent i.e. target of Rs40 in one year.