Tulsyan NEC Ltd. - Rs.47.00

Established in 1947, Tuslyan NEC Ltd. (TNL) is engaged in the production of TMT bars, billets and synthetic products such as polywoven sacks/bags and fabrics. TMT bars meet the demand of construction for housing/infrastructure sectors and polywoven sacks/bags meet the demand for packing of cement/sugar/fertilizers and other bulk packing requirements. The raw material for making bars is scrap, sponge iron and alloys whereas for woven sacks it is HDPE/PP granules, which are available in abundance within the country and can also be freely imported. With almost six decades of presence in the industry, TNL has earned a good name for its commitment to quality and timely supply. At one time, it was the largest manufacturer of HDPE Woven Sacks in South India and among the top 5 in the country.

TNL’s manufacturing facility is spread across Karnataka and Tamilnadu having an installed capacity of 72,000 MTPA of steel rods and 12,000 TPA of woven sacks/bags. Last fiscal, the company took a Rolling Mill on lease having a production capacity of 36000 MTPA in Coimbatore, which has enabled the billet plant to operate at its full capacity. And to meet the increasing demand, installing a new Rolling Mill with a having capacity of 1,50,000 MTPA at Gummudipoondi, Tamil Nadu. Incidentally, the company’s Jumbo bag i.e. 2 tonnes capacity bag is witnessing massive demand from international markets. And due to the strong growth in the industrial & infrastructure sectors in India, the demand for its HDPE/PP woven sacks & FIBC are also very encouraging. TNL has already expanded the capacity of its woven sack to 17,000 tonnes and is further taking it to 22,500 tonnes per year. It is also looking at entering into food packaging, conductive bags and lumber packing segments. In future, it has plans to become an integrated player by setting up a 200 tonnes per day sponge iron plant along with a captive 6 MW power plant. To increase its market share, the company is constantly enhancing its customer base and is now catering to the markets in Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh, Goa, Kerala and Karnataka.

Fundamentally, the company is quite strong having a good dividend track record and reserves of more than Rs.25 cr. leading to a book value of around Rs.60. For FY06, its performance was more or less flat with sales and net profit of Rs.328 cr. and Rs.4 cr. respectively. But it reported stellar performance for the first half of FY07. For the 6 months ending 30th September’06, both its sales and PBT increased by whopping 50% to Rs.195 cr. and Rs.4.25 cr. respectively. For the full year FY07, it is expected to report sales of Rs.400 cr. and PAT of Rs.6 cr. i.e. EPS of Rs.12 on its small equity of Rs.5 cr. At a reasonable discounting by of times, the scrip has the potential to touch Rs.75 (50% appreciation) in 12-15 months.