Stock Review: National Steel

National Steel is a small company having market cap of less than Rs 100 crore. To be precise market cap of close to about Rs 82-83 crore. But, in my view this is very good established company having Rs 3 lakh per tonne per annum of capacity of coal roll. They buy a hot roll coil and make the coal roll plus galvanize color coating sheets from the HR coil.

They have been consistently doing quite well. For FY10, they had an EPS close to about Rs 6.90. They have not yet come out with their Q4 results but for first 9 months of FY11 they have already cloaked in a turnover of Rs 1,770 crore with PAT of close to about Rs 24 crore. Because of very low equity of about Rs 32 crore they have an EPS of Rs 7.10 for the first nine months.

I am expect them to post an EPS of close to about Rs 240-250 for fourth quarter which will translate into an EPS of close to about Rs 9.50 to about Rs 10. We have seen the kind of valuations getting ramped up from for Uttam Galva when the LN Mittal Group acquired a stake in the company. Even going by the financials fundamentals of the company, the book value per share is about Rs 53 which translates into price to book of less than half.

Taking EPS of Rs 9.50 for FY11 and maybe in double-digit for FY12, the share is ruling at a PE multiple of close to about 2.5 times. So taking all these into consideration, the stock has ability to move to Rs 35- 40 in maybe next six to eight months time with very limited downside from here on. So, I like this stock.