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India Equity Research Reports, IPO and Stock News
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About the Company
Varun Industries is one of the fastest growing conglomerate which has
evolved from being India’s largest exporter of stainless steel kitchenware
to large set up of Wind power energy, Oil & Gas, Mines & Minerals,
Gem & Jewellery & Agro business.
Rare Earth- Steroids for the New world Economy
Rare earth is a series of 16 metals integral to the hybrid automotive, high
technology, defense and aerospace industries with virtually no
substitutes. The demand is expected to increase by 8-10% annually till
2015.China which controls more than 97% of global rare earth supply
has been restricting exports since 2009 to conserve resources and
protect the environment. It plans to shutdown 80 rare earth smelting
facilities from 100 to 20 and also reduces its annual export quota to
below 30,000 tons from 50, 145 tons in 2009. Given the growing
strategic importance of elements in user industries and dwindling
supplies from China, Prices have sky rocked by 3X to 7X across various
products in a year’s time outside China.
Outlook & Valuation
Varun Industries is transforming itself from being India’s largest
stainless steel exporter to a large conglomerate spanning business across
Steel, mines and minerals and energy. Varun’s Madagascar assets
provide immense option value to the group which we believe are in the
process of unlocking value. The upcoming gold mine and commencing
of rare earth processing plant from coming December and March
quarter respectively would add huge value to the company. It would
constitute 55% of FY13E profitability in its first year of operations and
gives headroom to expand aggressively given huge resources. However,
further feasibility study from Rare earth mines and planned production
remains a key monitorable thus leading to changes in our assumptions.
At the CMP, The stock trades at P/E of 11.08x and 2.82x FY12E and
FY13E respectively. We put a BUY rating on the stock with a target
price of Rs. 534 (6XEPSFY13E) providing an upside of 112% from
the current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
About the Company
Varun Industries is one of the fastest growing conglomerate which has
evolved from being India’s largest exporter of stainless steel kitchenware
to large set up of Wind power energy, Oil & Gas, Mines & Minerals,
Gem & Jewellery & Agro business.
Rare Earth- Steroids for the New world Economy
Rare earth is a series of 16 metals integral to the hybrid automotive, high
technology, defense and aerospace industries with virtually no
substitutes. The demand is expected to increase by 8-10% annually till
2015.China which controls more than 97% of global rare earth supply
has been restricting exports since 2009 to conserve resources and
protect the environment. It plans to shutdown 80 rare earth smelting
facilities from 100 to 20 and also reduces its annual export quota to
below 30,000 tons from 50, 145 tons in 2009. Given the growing
strategic importance of elements in user industries and dwindling
supplies from China, Prices have sky rocked by 3X to 7X across various
products in a year’s time outside China.
Outlook & Valuation
Varun Industries is transforming itself from being India’s largest
stainless steel exporter to a large conglomerate spanning business across
Steel, mines and minerals and energy. Varun’s Madagascar assets
provide immense option value to the group which we believe are in the
process of unlocking value. The upcoming gold mine and commencing
of rare earth processing plant from coming December and March
quarter respectively would add huge value to the company. It would
constitute 55% of FY13E profitability in its first year of operations and
gives headroom to expand aggressively given huge resources. However,
further feasibility study from Rare earth mines and planned production
remains a key monitorable thus leading to changes in our assumptions.
At the CMP, The stock trades at P/E of 11.08x and 2.82x FY12E and
FY13E respectively. We put a BUY rating on the stock with a target
price of Rs. 534 (6XEPSFY13E) providing an upside of 112% from
the current levels.
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