Buy Tata Metaliks, tgt Rs 220: PINC

PINC research has maintained buy rating on Tata Metaliks wih target price of Rs 220 in its May 06, 2008 report. "Tata Metaliks Ltd. (TML) reported net sales of Rs3.1 billion in Q4FY08, a YoY rise of 50%. This was on account of a 12% growth in sales volume and a 34% YoY surge in realisations. OPM remained flat as operating expenditure rose along with sales"

"Thus, operating profit registered a growth rate similar to sales and accelerated 52% to Rs 392 million. TML should be able to capitalise on buoyant pig iron prices and thus improve its OPM if it alters its raw material sourcing towards getting coking coal converted to coke from local cokeries, instead of buying coke at spot prices. Post commissioning of the DI pipe facility, its value chain would be the largest amongst pig iron players, which would result in a stronger revenue mix and impart earnings visibility. At the CMP of Rs 166, it trades at a P/E of 2.7x and EV/EBDIT of 1.2x its FY10E earnings. Considering the buoyant pricing environment, stabilisation of both its plants, improving operational efficiency through reliance on coking coal and the upcoming DI facility, we maintain our BUY’ recommendation with a 12 month revised price target of Rs 220." says PINC report.

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