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Tata Sponge Iron (TSIL) is an associate company of Tata Steel, which holds a 39.7%
stake in the company. TSIL is a leading manufacturer of sponge iron, which is used
as a raw material in steel manufacturing, with an installed capacity of 3,90,000mtpa
and a 26MW captive power plant.
The company gets 100% supplies of iron ore from Tata Steel with a 20-25% discount
from market prices, thus leading to at least 5% higher margins from other
non-integrated sponge iron players.
TSIL has a 45% stake in Talcher coal block in Orissa, with estimated reserves of
120mn tonnes for captive consumption. The company has deposited money for
the first phase of land acquisition with the Government of Orissa. Forest clearance
for the block is pending.
At the CMP of `311, the stock is trading at PE of 4.4x its FY2013E earnings and
P/B of 0.7x for FY2013E. The company is debt free with cash reserves of `299cr
and RoIC of 62.2% for FY2013E. We maintain our Buy view on the stock with a
target price of `429 and a target PE of 6x for FY2013E
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Sponge Iron (TSIL) is an associate company of Tata Steel, which holds a 39.7%
stake in the company. TSIL is a leading manufacturer of sponge iron, which is used
as a raw material in steel manufacturing, with an installed capacity of 3,90,000mtpa
and a 26MW captive power plant.
The company gets 100% supplies of iron ore from Tata Steel with a 20-25% discount
from market prices, thus leading to at least 5% higher margins from other
non-integrated sponge iron players.
TSIL has a 45% stake in Talcher coal block in Orissa, with estimated reserves of
120mn tonnes for captive consumption. The company has deposited money for
the first phase of land acquisition with the Government of Orissa. Forest clearance
for the block is pending.
At the CMP of `311, the stock is trading at PE of 4.4x its FY2013E earnings and
P/B of 0.7x for FY2013E. The company is debt free with cash reserves of `299cr
and RoIC of 62.2% for FY2013E. We maintain our Buy view on the stock with a
target price of `429 and a target PE of 6x for FY2013E
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