Market Price Rs 39 (FV 10 )
Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 768 crs
Date: 20th Jan 2017
Target : Rs 55
About the Company:
The SUNFLAG STEEL is an ISO/TS 16949:2009 and ISO-9001:2008 approved, NABL accrediated AD 2000 Merkblatt WO Certified from TUEV-NORD, backed up with sound management practices and a highly motivated team. It is a small wonder the Sunflag products are exported to a number of countries in the world. The company is promoted by Mr Satyadev Bharadwaj.
The main products of the company include steel flats, rounds, round cornered squares, HEX and coils. The steel produced by Sunflag is also used in defence areas. The company has partnered Japan based company Daido steel. This company has seen the ups and downs of the steel industry and has survived quite well as the company has managed to make profits even in the tough times.
The company reported the sales for year 2011-12, the sales were at Rs 1618 crores and net profit was at Rs 19.37 crores. For the year 2012-13, the sales were at Rs 1569 crores and the net loss was at Rs 12 crores. The year 2013-14 saw sales of Rs 1585 crores and net profit was at Rs 21.68 crores. The year 2014-15 saw sales of Rs 1756 crores and net profit was at Rs 24.41 crores. The year 2015-16 saw sales of 1661 crores and net profit of Rs 57.34 crores. This year that is 2016-17 the net profit will be about 75 crores. EPS will cross Rs 4 per share.
Promoters hold about 62.77 % and, the public holding is about 37% .
Comparisions to Peers:
The company can be given an average PE of what is given to steel companies. The range will be in the region of 10-12.
During the financial year 2015-2016, the Company had installed alloy feeding system in Ladle re-heating furnace – 2 of Steel Melt Shop wherein alloy materials will be weighed and fed through automatic process in to steel ladle in re-heating process. This system has reduced heat cycle time and in turn, has resulted in improved productivity. Further, the Company has proposed installation of new capital projects, viz., (i) Pulverized Coal Injection System (ii) Refurbishing of Mini Blast Furnace (iii) Capacity Enhancement of Sinter Plant (iv) Conversion of Heat Recovery Boiler of DRP-I to Dual Operation of FBC and WHRB. The projects are expected to be commissioned in the financial year 2017-2018. This will aid the future growth of the company.
At current price of Rs 39 per share the company is available at a low valuation. If bought at current valuation, it can easily cross Rs 55 per share in the next 1 year.
( Disclosure: The analysthas noholdings in the company as on date of issue being published)
Sebi Registration No: INH000001717