Hariyana Ship Breakers - Rs.26.00

Established in 1981, Hariyana Ship Breakers Ltd (HSBL) is the flagship company of Hariyana Group, which has diversified interest in Ship-breaking activities, Sponge iron, Steel, Power, Dealing in properties, Stock & shares investment and Housing construction. Inducto Steel, Hariyana Ship Demolition Pvt. Ltd, Hariyana International, Bapa Real Estate etc are some of its group companies. HSBL is an ISO certified company by BVQI. It is among the few ship-breaking companies to have been listed on the BSE. It had come out with a public issue of Rs.2.80 cr. at a premium of Rs.10 in 1995.

HSBL carries out its ship-breaking activities at Alang in Gujarat, which is the main port for the ship-breaking activities not only in India but also in the world. Interestingly, it has imported one of the largest ships ‘Pacific Blue’ of 57000 tonnes ever imported into India for breaking. The company also has trading activities of import/export of iron & steel goods. Due to wide fluctuations in the prices of old ships in the international market, HSBL is exercising caution and has not purchased any new ship this fiscal. But it is expected that the market for old ships will stabilize in the near future and it will be able to carry on the activities accordingly. To compensate for this delay, the company has set-up a sponge iron, power & concast plant at Hassan with an installed capacity of 1,00,000 TPA. This division of the company was put up under the name of ‘Hariyana Steel & Power’. It has already completed the installation on the first kiln of the sponge iron plant and started the commercial production in March 2005. The second kiln is in an advanced stage of installation and is expected to go into stream by June 2006. HSBL is also implementing a power plant using flue gas from the sponge iron plant.

Meanwhile, the company has undertaken trading of various ferrous and non-ferrous metal as well as shares, which has helped to maintain the bottomline. For FY06, it is expected to register total revenue of Rs.110 cr. and NP of more than Rs.32 cr. This works out to an EPS of Rs.6 on its current equity of Rs.5 cr. It may declare 10% dividend, which means a dividend yield of 4% at its current market price (CMP). With the Steel & Power division expected to contribute substantially to the revenue in coming years, it may post an EPS of more than Rs.8 for FY07. Having a market cap of only Rs.13 cr. and 52W H/L of 42/19 and a forward discounting of only 3x, this scrip seems a good bet. Yet, only aggressive investors are recommended to buy as currently it’s more of a trading and metal company rather than ship-breaking one.