Stelco Strips - Rs.19.00

Stelco Strips Ltd (SSL), promoted by Mr. Om Prakash Jindal was incorporated in 1988 as a Private Limited Company and was subsequently converted into a Public Limited Company in June 1989. Its main objective was to manufacture cold-rolled close-annealed (CRCA) steel strips of mild steel, medium and high-carbon steel. Later, it also started producing wider width CR steel strips, which was a huge success. Its products are used to manufacture cycle and auto parts, cycle chains, hacksaw blades, industrial knives, agricultural implements etc. SSL has a well established customer base including reputed OEMs in the domestic and international markets. Currently, the company has put more thrust to increase its export to China, Ethiopia, Vietnam, Germany etc which currently accounts for 36% of its sales.

SSL’s manufacturing plant, which is ISO-9001:2000 certified is located in Ludhiana having an installed capacity of 16,000 TPA for narrow width and 50,000 TPA for wider width of cold rolled steel strips. It has also set up another wider width CRCA steel strip plant with capacity of 36,000 TPA. For future growth, SSL is implementing a forward integration programme of a Continuous Galvanising Line for the manufacture of GP and G.C sheets adjacent to its manufacturing facilities at Doraha in Dist. Ludhiana. Civil work has already been completed and the machinery has started arriving at the site. Trial production is expected to start soon. Galvanized steel has a big requirement in domestically as well as globally in housing & construction activities, for infrastructure projects in consumer durables, automobiles and OEMs.

To fund its expansion, the company has recently made a preferential allotment of 7,10,000 shares to the promoters @ Rs.31 which will bring in around Rs.2 cr. For FY05, its Sales increased by 60% to Rs.128 cr. and NP has more than doubled to Rs.3.51 posting an EPS of Rs.5 on its equity of Rs.6.86 cr. The first half of the current year was quite encouraging although the second half will not be so rosy due to a fall in steel prices. Still for full FY06, the company may report total sales of Rs.150 cr. and NP of around Rs.4~4.5 cr. and post an EPS of Rs.5~6 on its diluted equity of Rs.7.60 cr. Long-term investors are recommended to buy it at current levels as the scrip can double in 12~15 months.