Sector View on Indian Steel Industry

KRChoksey Shares & Securities on TATA STEEL

The company’s EBITDA has increased by 43.68% Y-o-Y from Rs 2,733.4 cr to Rs 3,075.9 cr. While PAT has increased to 50.13% from Rs 1,488.4 cr to Rs 1787.8 cr. Other income has also increased by 152.72% which has led to increase in the profit margins. We recommend a buy on the stock despite the growth concerns purely on the basis of attractive valuations.

KRChoksey Shares & Securities on SAIL

SAIL’s net sales increased 34% Y-o-Y to Rs 12,238.59 crore in Q2FY09 as against Rs 916 3.49 crore during Q2Y08. EBITDAof the company registered a growth of 17% Y-o-Y to Rs 3,433.92 crore & PAT rose by 18% Y-o-Y to Rs 2,009.6 crore. The second half of FY09 is expected to present significant challenges in the metals sector, though the long term fundamentals of the company remains strong.

Geojit Financial Services on JSW STEEL

The company is among the largest Indian steel companies. It has now tied up with UK based Severfield Rowen to float an equal stake joint venture company for manufacturing construction steel. The net profit of the company has grown 44.72% from the June quarter to this September quarter. The P/E of the stock is 3.43 and the EPS (TTM) is at 70.89.

Geojit Financial Services on WELSPUN GUJARAT STAHL

Welspun Gujarat Stahl Rohren is the flagship company of Welspun Group. It is all set to be positioned as the world’s largest pipe company with an increase in capacity from 1 million ton pa to 1.75 million ton by March 2009. The debt-equity ratio at 1.21 shows that most of the assets are financed and it must set aside more money to pay the cost of borrowed money.

Emkay Global Financial Services on HEG

HEG will become number one manufacturer of graphite electrodes in India after its expansion from 60000 tpa to 80000 tpa by Q4FY09. We expect topline and PAT to have CAGR of 37% and 25% respectively for next two years. It is trading at 5.9x FY09E FDEPS of Rs21.2 and at 2.6x FY10E FDEPS of Rs48.8.

Emkay Global Financial Services on GODAWARI POWER AND ISPAT

Godawari Power’s iron ore pelletisation will commence in 2HFY10 while the iron ore mining will start from Q4FY09 which will translate into tremendous savings. PAT is expected to grow at CAGR of 47% GPIL trading at 1.6x FY09E FDEPS of Rs40.2 and at 0.8x FY10E FDEPS of Rs76.6, while on EV/EBITDA basis it is trading at 2.4x FY09E EV/EBITDA and at 1.2x FY10E EV/EBITDA.