Electrosteel Castings Ltd

Transcription

Initiating coverage
Enhancing investment decisions
Explanation of CRISIL Fundamental and Valuation (CFV) matrix
The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process –
Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental
grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The
valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to
grade 1 (strong downside from the CMP).
CRISIL
Fundamental Grade
Assessment
CRISIL
Valuation Grade
Assessment
5/5
Excellent fundamentals
5/5
Strong upside (>25% from CMP)
4/5
Superior fundamentals
4/5
Upside (10-25% from CMP)
3/5
Good fundamentals
3/5
Align (+-10% from CMP)
2/5
Moderate fundamentals
2/5
Downside (negative 10-25% from CMP)
1/5
Poor fundamentals
1/5
Strong downside (<-25% from CMP)
Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest
that can bias the grading recommendation of the company.
Disclaimer:
This Company-commissioned Report (Report) is based on data publicly available or from sources considered reliable. CRISIL Ltd.
(CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / Report are
subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing
in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assumes
the entire risk of any use made of this data / Report. CRISIL especially states that it has no financial liability, whatsoever, to the
subscribers / users of this Report. This Report is for the personal information only of the authorized recipient in India only. This
Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person – especially
outside India or published or copied in whole or in part, for any purpose.
December 09, 2010
Polaris Software Limited
Electrosteel
Business momentumCastings
remains intact Ltd
Fair Value Rs 58
CMP
Rs 38
Mining its way ahead
CFV MATRIX
Valuation Grade
5/5 (CMP has strong upside)
Industry
Information
technology
Metals and mining
Excellent
Fundamentals
Kolkata-based Electrosteel Castings Ltd (Electrosteel) is a water infrastructure
company manufacturing ductile iron (DI) pipes. The group has a ~60% market
share in the domestic DI pipe market. We assign Electrosteel a fundamental
grade of ‘4/5’, indicating that its fundamentals are ‘superior’ relative to other
listed securities in India.
4
3
2
1
1
Poor
Fundamentals
2
3
4
5
Valuation Grade
Strong
Downside
Thrust on water infra will boost DI pipe demand…
The demand for DI pipes is expected to increase with the allocation for water
infrastructure raised by 131% to Rs 1.48 tn under the Eleventh Five Year Plan.
The demand for DI pipes is likely to increase at a CAGR of 16-18% to ~1.2-1.3
mn TPA (tonnes per annum) in FY13.
5
Strong
Upside
4/5 (Strong
fundamentals)
(superior
fundamentals)
Fundamental Grade
Fundamental Grade
… but industrial overcapacity will constrain profitability
The domestic DI pipe industry has seen significant capacity additions. The total
installed capacity for DI pipes, up from 0.7 mn TPA in FY09 to 1.26 mn TPA in
FY10, is likely to increase further to ~1.8 mn TPA in FY13 (vis-à-vis 1.2-1.3
mn TPA demand) with more capacity additions by existing and new players.
We expect this overcapacity to reduce profitability in the medium term. The
international market, where the company sells ~30% of its production, is
expected to cushion the drop in domestic volume.
KEY STOCK STATISTICS
Market cap (Rs mn)/(US$ mn)
12,253/272
Captive mines to improve EBITDA per tonne in the medium term
Enterprise value (Rs mn)/(US$ mn)
18,242/405
Electrosteel’s captive coking coal mine has started production and is expected
to ramp up over the next two years. The mine would cater to 30% of the
company’s requirement and the surplus would be sold to associates. The iron
ore mine is awaiting regulatory clearances. We expect production to start only
in H2FY13. Overall, we expect the full benefit of the two mines to accrue in
FY14 after which the company’s EBITDA/tonne will increase significantly.
52-week range (Rs) (H/L)
Standalone revenues to increase at a CAGR of 5% in FY10-13
We expect standalone revenues to increase to Rs 17.6 bn in FY13 from Rs 15
bn in FY10. We expect volume growth to be muted as the company is
operating at 88-90% capacity utilisation. We expect realisations to increase at
a lower rate than the increase in costs. EBITDA/tonne is expected to decline
and then improve in FY13 due to cost benefits from captive mines. Also,
adjusted PAT is expected to decline over FY10-12 and then increase in FY13 to
Rs 1.5 bn due to benefits from captive mines.
SHAREHOLDING PATTERN
NIFTY/SENSEX
NSE/BSE ticker
CRISIL Equities has used the sum-of-the-parts method to value Electrosteel
and arrived at a fair value of Rs 58 per share. We initiate coverage on
Electrosteel with a valuation grade of ‘5/5’.
ELECTROST
Face value (Rs per share)
1
Shares outstanding (mn)
327
56/36
Beta
1.12
Free float (%)
51.6%
Avg daily volumes (30-days)
365613
Avg daily value (30-days) (Rs mn)
14.8
100%
90%
80%
37.0%
37.0%
37.0%
36.2%
10.6%
4.3%
10.1%
4.6%
9.7%
4.9%
9.6%
5.9%
48.1%
48.4%
48.4%
48.4%
Dec-09
Mar-10
70%
60%
50%
40%
30%
20%
Valuations – the current price has ‘strong upside’
5904/19696
ELECTCAST/
10%
0%
Promoters
FII
June-10
DII
Sep-10
Others
PERFORMANCE VIS-À-VIS MARKET
KEY FORECAST (STANDALONE)
(Rs mn)
FY09
FY10
Operating income
FY11E
FY12E
Returns
FY13E
19,976
15,029
14,892
15,161
17,558
1-m
3-m
6-m
12-m
EBITDA
3,397
3,129
2,520
2,550
3,715
Electrosteel
-8%
-28%
-17%
-15%
Adj Net income
1,058
1,570
1,199
1,087
1,534
NIFTY
-6%
5%
18%
15%
3.7
4.8
3.7
3.3
4.7
EPS-Rs
EPS growth (%)
190.0
36.0
(40.7)
(9.3)
41.1
PE (x)
4.0
11.0
10.2
11.3
8.0
P/BV (x)
0.3
1.1
0.7
0.7
0.6
ANALYTICAL CONTACT
Chetan Majithia (Head)
chetanmajithia@crisil.com
13.4
10.0
7.4
7.3
10.6
Kamna Motwani
kmotwani@crisil.com
RoE (%)
8.2
10.5
7.3
6.3
8.4
EV/EBITDA (x)
3.4
7.9
7.2
7.3
5.1
Vishal Rampuria
vrampuria@crisil.com
RoCE (%)
Source: Co mpan y, CRISIL Equ ities estimate
Client servicing desk
NM: Not meaningful; CMP: Current Market Price
+91 22 3342 3561
clientservicing@crisil.com
CRISIL EQUITIES | 1
Table 1 : Electrosteel: Business environment
Ductile iron (DI) pipes
Cast iron (CI) pipes
DI fittings
74.7%
10.9%
3.2%
74.2%
6.8%
3.5%
Revenue
contribution
(FY10)*
Revenue
contribution
(FY13#)
Geographic
presence
• India, the US, the UK, Spain,
• India, the US, the UK, Spain,
France, Portugal, Algeria,
France, Portugal, Algeria,
Singapore, Hong Kong, Mauritius,
Singapore, Hong Kong,
Sri Lanka, Bangladesh, Qatar and
Mauritius, Sri Lanka,
Bahrain
Bangladesh, Qatar and
• India
Bahrain
Market position
• ~60% market share in India
Demand drivers
• Increased spending on water supply
and sanitation infrastructure by
NA
• Shift in preference from CI
pipes to DI pipes
NA
• Increase in demand for
DI pipes
Government of India
• Growth in export markets
Margin drivers
• Reduction in cost of iron ore and coking coal once the captive mines become fully operational
Key competitors
• Domestic : Jindal Saw,
NA
NA
Electrotherm Ltd, Tata Metaliks, Jai
Balaji Industries
• International: Saint Gobain
Source: Co mpan y, CRISIL Equ ities
* The company also earns revenues from trading activities.
# The company is expected to get revenues from sales of coking coal to associate company from FY13 onwards.
CRISIL EQUITIES | 2
Grading Rationale
Market leader in the domestic DI pipe market
Electrosteel has ~60%
share in the domestic DI
pipe market
Electrosteel entered the domestic DI pipe market in 1994 and currently enjoys
~60% market share along with its associate company Lanco Industries
(acquired in 2002). The group had a complete monopoly untill FY06 when Jindal
Saw entered the market. With the entry of other players like Jai Balaji Industries
and Tata Metalliks, Electrosteel’s market share is expected to drop further
though it will remain the largest player in the industry. Major buyers of DI pipes
are government organisations, municipal bodies and infrastructure companies.
Table 2: Installed capacity of DI pipes in FY10
Figure 1: DI pipe capacity additions
(TPA)
Location
300,000
1,50,000
Kutch, Gujarat
Pipe Co. Ltd.
1,10,000
Kharagpur, West Bengal
Jai Balaji Industries
2,40,000
Durgapur, West Bengal
Tata Metaliks Kubota
Sou rce: Com pan y annua l re po rts
100,000
50,000
240,000
Electrotherm
150,000
110,000
Mundra, Gujarat
300,000
3,00,000
280,000
Jindal Saw
200,000
180,000
Chittoor, Andhra Pradesh
200,000
1,80,000
48,000
Lanco Industries Ltd
280,000
Khardah, West Bengal
180,000
2,80,000
150,000
250,000
200,000
(TPA)
250,000
Capacity
120,000
Company
350,000
0
FY08
FY09
FY10
Electrosteel Castings
Jindal Saw
Lanco Industries
Electrotherm Ltd
Jai Balaji Industries
Tata Metaliks Kubota Pipe Co. Ltd
Industry to benefit from increased investment in
water supply and sanitation
Safe water supply and sanitation requirements have increased the focus on
water and water infrastructure. DI pipes, considered to be superior to other
kinds of pipes, are finding increased use in water and sewerage transportation
systems. In the current five year plan (2007-2012), the Government of India
Under the Eleventh Five
Year Plan (2007-2012), Rs
1.48 tn has been allocated
for development of water
supply and sanitation
infrastructure
(GOI) has increased the fund allocation for development of water supply and
sanitation facilities in rural and urban areas by 131% to Rs 1.48 tn from Rs 621
bn in the 10th Five Year Plan. The government has launched two programmes to
develop water and sanitation facilities in urban areas:
•
The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) will cover
63 cities with a population of over 1 mn including 35 metros and other state
capitals with an expected outgo of Rs 1 tn.
•
The Urban Infrastructure Development Scheme for Small and Medium
Towns (UIDSSMT) will cover the remaining 5,098 towns having a population
of less than 1 mn.
On the back of increased spending, the domestic DI pipes industry grew at a
two-year CAGR of 13.3% over FY08-10. According to industry sources, demand
is expected to grow at 16-18% over the next two-three years on the back of
The domestic DI pipes
industry is expected to
grow at 16-18% over the
next two-three years
increased government spending. Additionally, the export market offers a sizable
opportunity due to the cost benefit in India.
CRISIL EQUITIES | 3
Figure 2: Funds allocated in 11th Five Year Plan
533%
1,600
1,400
1,200
800
131%
277%
1,000
137%
600
395
621
2001-07
167
1997-01
1985-90
1980-85
44
1992-97
65
1990-92
10
0
600%
900,000
500%
800,000
400%
700,000
300%
600,000
200%
500,000
100%
400,000
0%
300,000
-100%
200,000
2007-12
-32%
1,437
57%
400
200
Figure 3: Industry volumes of DI pipes have grown
(Tonne)
(Rs bn)
Funds allocated towards water supply and sanitation
Growth (RHS)
Sou rce: P lann ing Com miss ion
60%
50%
40%
30%
17.4%
20%
9.4%
10%
0%
100,000
593,970
697,226
762,549
FY08
FY09
FY10
0
-10%
Total DI pipes volumes sold
Volume growth (RHS)
Capacity expansion results in overcapacity
Electrosteel group is expanding its DI pipes capacity by 3,30,000 TPA under its
associate company Electrosteel Steel Ltd. Its main competitor, Jindal Saw (with
an annual capacity of 3,00,000 TPA) is also expanding the capacity at its Mundra
facility by 2,00,000 TPA, which is expected to be functional by FY13. Also, two
Electrosteel’s realisations
to be impacted in the
medium term due to
overcapacity in the
domestic market
new companies, Tata Metaliks and Jai Balaji Industries, have entered the
domestic DI pipe manufacturing market with capacities of 1,10,000 TPA and
2,40,000 TPA, respectively.
CRISIL Equities believes that the increase in supply of DI pipes in the domestic
market will put pressure on players’ profitability and will have an impact on their
bargaining power. However, new entrants will take some time to get the BIS
(Bureau of Indian Standards) and ISO approvals and stabilise their quality, plus
they will not be eligible for most government contracts, which stipulate threefive years of experience. Hence, we do not expect Electrosteel’s FY11
profitability to be significantly impacted, but would likely face challenges in the
following two years.
Export markets to offset local competition
For more than a decade, Electrosteel has been exporting DI pipes and fittings to
the UK, Spain, France, Portugal, Algeria, Singapore, Hong Kong, Mauritius, Sri
Lanka, Bangladesh, Qatar and Bahrain. It has recently entered the US. It
operates in these regions through its subsidiaries in France, the UK, Algeria,
Electrosteel is an
established player in the
international DI pipe
market
Singapore and the USA. Over the years, ~35% of Electrosteel’s revenues have
been accruing from international markets.
Increasing global focus to supply safe water to all and a rising preference for DI
pipes over other pipes for water infrastructure are expected to drive growth in
the international markets. Electrosteel has already established itself as a strong
player in the export market and is expected to benefit from the growth in global
demand for DI pipes. Therefore, a presence in the export market gives
Electrosteel a competitive advantage to cushion itself from any major drop in
volumes due to over-capacity in the domestic market.
CRISIL EQUITIES | 4
Figure 4: Exports contribute ~35% to revenues
(Rs mn)
(Tonnes)
60%
50%
2,000
6%
3,346
4,470
0
FY06
FY07
20%
80,000
10%
0%
4,344
4,792
5,071
FY08
FY09
FY10
International revenue
100,000
60,000
40,000
-3%
1,000
120,000
30%
-10%
20,000
0
FY08
Revenue growth (RHS)
Sou rce: Com pan y
96,224
10%
140,000
40%
132,662
25%
34%
3,000
35%
31%
89,160
33%
160,000
158,859
38%
103,413
5,000
180,000
98,720
6,000
4,000
Figure 5: Volumes in domestic and export markets
FY09
Domestic market
FY10
International market
Sou rce: Com pan y
Backward integration has reduced costs
Electrosteel has taken several backward integration measures to reduce raw
material costs significantly and ensure steady availability of coal and iron ore.
The company has installed coke-oven batteries and a blast furnace to meet its
internal requirement and reduce costs. Electrosteel commissioned a sinter plant
at its Khardah facility in 2008 which allows it to use iron ore fines instead of iron
Electrosteel commissioned
a sinter plant at its
Khardah facility in 2008,
which reduced the cost of
iron ore by ~35-40%
ore lumps for manufacturing liquid metal. Since iron ore fines cost 35-40% less
compared to lumps, the commissioning of the plant has reduced the iron ore
cost significantly of the company.
Captive mines to reduce raw material costs further
The main raw materials used by Electrosteel are coking coal and iron ore which
account for ~76% of the total raw material cost. The company is currently
sourcing coking coal from Australia and iron ore from mines in Orissa. Coking
coal prices are revised quarterly while iron ore is bought at market rates on a
continuous basis. However, fluctuations in raw material prices adversely affect
The company has been
allocated coking coal and
iron ore mines in
Jharkhand
the company’s EBITDA per tonne since most contracts do not have a price
escalation clause. To overcome this, the company is in the process of adopting a
backward integrated business model. It has been allotted coking coal, iron ore
and non-coking coal mines in Jharkhand. The company has full ownership of the
coking coal and iron ore mines and holds 49% in the non-coking coal mine
through a JV.
CRISIL EQUITIES | 5
Table 3: Status of mines allotted to Electrosteel
Coking coal
Iron ore
Non-coking coal (JV)
Location
Parbatpur, Jharkhand
Kodolibad, Jharkhand
North Dhadhu, Jharkhand
Geological reserves
231.2 mn tonnes
91.2 mn tonnes
120 mn tonnes
Type of mining
Underground
Open cast
Open cast
Current status
•
•
•
Final statutory clearance
received
•
•
Forest clearance from MOEF
Mining lease application has
yet to be received
been made. Mining plan yet to
Mining lease would be
be submitted to Ministry of
coal seams started
executed post MOEF
Coal
Coal washery plant with
clearance
Coal production from few
•
capacity of 2 mn MT set up
Source: Co mpan y
Coking coal mine starts
Production has started from the open cast area of the coking coal mine with a
current output of ~5,000 tonnes per month. The coal being mined is of washery
grade 2-4. The production is expected to be ramped up over the next two years
to 0.6-0.7 mn TPA as the company reaches the underground reserves.
Coal from the mine will
also be supplied to
Electrosteel Steel Ltd
This
mine is expected to cater to 30% of Electrosteel’s coking coal requirement due
to its superior grade. The remaining coal from the mine will be sold to the group
companies to meet their requirements.
Iron ore production expected to start in H2FY13
The iron ore mine is awaiting stage 1 MOEF (minsitry of environment and forest)
regulatory clearance. The company indicated that the mine falls under the ‘go
area’ and is thinly populated. With some areas falling under the forest zone, the
company has applied for forest diversion. We expect production to start only in
H2FY13.
Table 4: Cost savings from coking coal mine
Coking coal
Table 5: Cost savings from iron ore mine
FY11E
FY12E
FY13E
from mines
5.0%
30.0%
30.0%
from mines
Market price (Rs per tonne)
9,944
10,440
10,886
Market price (Rs per tonne)
% of requirement supplied
Iron ore
FY11E
FY12E
FY13E
0.0%
0.0%
43.4%
2,908
3,054
3,206
2,250
% of requirement supplied
Blended cost including captive
Blended cost including captive
mine (Rs per tonne)
9,628
8,248
8,554
mine (Rs per tonne)
2,908
3,054
Cost saving (Rs mn)
90
618
671
Cost saving (Rs mn)
-
-
441
3.2%
21.0%
21.4%
0.0%
0.0%
29.8%
% saving
Sou rc e: Com pan y, CR I SIL Equ it ies
% saving
Also, the company is setting up railway sidings facilities for transporting material
from the Parbatpur coking coal and the Kodolibad iron ore mines to the
manufacturing facilities, and has already acquired two wagon rakes from Indian
Railways. This is expected to reduce logistics costs too.
CRISIL EQUITIES | 6
Profitability to improve as mine starts production
The company’s
EBITDA/tonne dropped to
Rs 6,745 in FY08 from Rs
9,419 in FY07 due to steep
rise in raw material prices
The company is not able to pass on any rise in raw material prices immediately
to customers as most contracts do not carry price escalation clauses. In FY08,
prices of coking coal and iron ore shot up. Since the average realisation
remained flat, EBITDA per tonne dropped to Rs 6,745 in FY08 from Rs 9,419 in
FY07. It increased to Rs 11,593 in FY09 due to a sharp rise in average
realisation per tonne.
We expect the average realisation per tonne to increase marginally over FY10-
Average realisation per
tonne expected to increase
moderately in FY10-13
13 mainly, at a lower rate than the increase in costs. The benefit of the captive
mine will start reflecting with production ramping up. The coal mine is expected
to become fully operational by FY12 and production in the iron ore mine is
Full benefit of mines to
accrue by FY14
expected to start in H2FY13. We expect the full benefit of the mines to
come in only by FY14.
We expect the EBITDA per tonne to drop to Rs 9,347 in FY11 and then increase
to Rs 12,401 in FY13 when captive sources meet the raw material requirement.
In the medium term, any fluctuation in the raw material prices will
impact the EBITDA per tonne of the company adversely.
Figure 6: EBITDA/ tonne to stay under pressure …
Figure 7: … but to improve thanks to mines
(Rs per
tonne)
(Rs per
tonne)
60,000
14,000
50,000
12,000
10,000
55,817
8,000
4,000
9,347 9,029
9,613
8,569
7,388
2,000
0
0
FY06
FY07
FY08
FY09
FY10
FY11E
Average realisation
FY12E
FY13E
FY11E
EBITDA
EBITDA with mines
is
venturing
into
steel
manufacturing
FY12E
FY13E
EBITDA without mines
To diversify to steel making through associate ESL
Electrosteel
12,401
6,000
12,401
52,983
9,613
51,234
9,347
51,680
13,328
52,774
37,088
9,419
36,420
6,745
10,000
35,066
20,000
7,993
30,000
11,593
40,000
through
its
associate
Electrosteel Steel Ltd (ESL). The company is setting up a 2.2 mn TPA plant at
Siyaljori (Jharkhand). The project also includes 3,30,000 TPA of DI pipes. The
ESL has competitive
advantage over other midsized steel players due to
backward integration
total cost of the project is Rs 73.6 bn, being funded in the debt/equity ratio of
2.84:1. The raw material would be supplied from Electrosteel’s captive coking
coal and iron ore mines at cost plus 20%.
Post IPO, Electrosteel holds a 32% stake in ESL at an investment of Rs 7 bn.
The other major stakeholders are Stemcor Cast Iron Ltd and IL&FS Investment
Managers. ESL has entered into a delivery and marketing agreement with
Stemcor through which it plans to gain entry into the steel export markets. We
expect significant value to unlock from the associate company due to captive
CRISIL EQUITIES | 7
linkage from the group mines. However, due to project execution risks and
limited experience in steel manufacturing, we remain cautious of any value
accretion at this point of time.
Steered Lanco on the growth path
Electrosteel
acquired
46%
stake
in
Lanco
Industries
in
2002,
which
Lanco Industries showed
strong growth post
acquisition by Electrosteel
manufactures DI pipes, pig iron and cement. At the time of the acquisition,
Lanco Industries had total revenues of Rs 909 mn, EBITDA loss of Rs 140 mn
and net loss of Rs 243 mn. With management control, Electrosteel turned
around Lanco successfully. In FY10, Lanco’s revenues were Rs 6.9 bn and net
profit was Rs 586 mn.
Figure 8: Lanco’s revenues up post acquisition
Figure 9: Electrosteel has turned Lanco profitable
(Rs mn)
30%
8,000
150%
125%
7,000
6,447
6,906
6,000
110%
4,637
5,000
2,102
2,000
909
933
36%
22%
3%
0
26%
-7%
-20%
10%
7%
6%
-30%
-10%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Revenue
1%
3%
FY06
FY07
6%
8%
3%
-10%
-15%
-27%
FY02
Revenue Growth (RHS)
Sou rce: Com pan y
7%
-10%
30%
39%
16%
11%
12%
0%
50%
14%
9%
6%
10%
70%
2,861 3,030
3,000
16%
90%
3,694
4,000
1,000
21%
20%
130%
FY03
FY04
FY05
EBITDA Margin
FY08
FY09
FY10
PAT Margin
Sou rce: Com pan y
Peer comparison – Volumes and realisations of DI pipes
FY10
Volumes (tonne)
Electrosteel
Lanco
Castings
Industries
Jindal Saw* Electrotherm Ltd
233,448
149,805
344,200
Sales (Rs mn)
11,219
6,377
17,512
61,830
2,954
Average realisation per tonne
48,060
42,570
50,877
47,778
Source: Co mpan y annual reports
* Jindal Saw’s numbers are for 15 months
CRISIL EQUITIES | 8
Financial Outlook
Standalone revenues to increase at a CAGR of 5%
Standalone revenues to
grow due to realisation
growth and sale of coking
coal to associate company
Electrosteel’s standalone revenues are expected to increase at a CAGR of 5% to
Rs 17.6 bn in FY13 from Rs 15 bn in FY10. We do not expect any major growth
in the standalone entity’s volume as it is currently operating at 85-88% capacity
utilisations
levels.
The
company’s
realisations
are
expected
to
increase
marginally due to increase in raw material prices. We expect revenues from DI
pipes to continue to be the major contributor to total revenues with a three-year
CAGR of 5% over FY10-13. Revenues from cast iron (CI) pipes are expected to
decline by 10% over FY10-13 due to lower demand. Also, revenues from DI
fittings are expected to increase at a three-year CAGR of 8%. Aditionally, the
company is expected to start selling coking coal from captive mines to the
associate companies from FY13. We expect Electrosteel to sell 3,00,000 tonnes
to ESL in FY13 at 30% EBITDA margin.
Figure 10: Standalone revenues to rise to Rs 17.6 bn
Figure 11: International revenues to grow faster
(Rs mn)
25,000
81%
82%
88%
88%
90%
17,558
15,029
13,976
60%
100%
14,892
15,161
40%
30%
60%
40%
16%
5,000
-1%
FY08
Revenue
FY09
2%
-20%
FY10
-40%
FY11E
FY12E
Revenue Growth (RHS)
7.1%
5.1%
18.4%
0%
-10%
-3.4%
-0.6%
-20%
-25%
0
0%
8.6%
10%
20%
10,000
10.5%
16.2%
20%
43%
17%
51.9%
50%
80%
19,976
20,000
15,000
89%
-30%
-33.4%
-40%
FY09
FY13E
Capacity utilisation*
FY10
FY11E
Domestic revenue growth
FY12E
FY13E
International revenue growth
* Capacity utilisation excluding CI pipes
EBITDA/tonne to improve due to captive mines
Historically, the company’s EBITDA/tonne has been under pressure whenever
there has been a sharp increase in raw material prices. To overcome this, the
company has adopted a backward integration model and has invested in coking
coal, iron ore and non-coking coal mines in Jharkhand. While the coking coal
mine has already started production, the iron ore mine is awaiting approvals and
Impact of rise in raw
material prices on EBITDA
per tonne to be
moderated due to benefit
of mines
is expected to start production by H2FY13. We expect the full benefit of mines to
accrue from FY14 onwards. We expect the average realisation to grow at a lower
rate than the increase in costs as the industry will face overcapacity over the
next two to three years. However, this impact will be moderated due to some
production from the mines which will improve EBITDA/ tonne to Rs 12,401 in
FY13.
CRISIL EQUITIES | 9
Figure 12: Mining to boost EBITDA/tonne
(Rs per tonne)
60,000
50,000
12,401
55,817
24,965
9,613
52,983
25,250
9,347
51,234
51,680
13,328
24,367
20,833
10,000
21,422
52,774
11,977
6,745
20,000
37,088
30,000
11,593
40,000
0
FY08
FY09
Average Realisation
FY10
FY11E
FY12E
Raw material cost
FY13E
EBITDA
PAT to decline over FY10-12 and then improve due
to benefit from captive mines
We expect Electrosteel’s standalone adjusted PAT to decline over FY10-12 and
then increase to Rs 1.5 bn in FY13 due to benefits from captive mines. The
company is expected to incur a capex of Rs 5 bn for the coking coal mine and
Expected to post PAT of
Rs 1.5 bn in FY13
Rs 5 bn for the iron ore mine, out of which, an outlay of Rs 4 bn has already
been made for the coking coal mine. We expect the company to incur ~Rs 3 bn
for development of mines over FY10-13 which will increase capital costs. The
RoE is expected to drop in FY10-13 due to a decline in profitablity. In addition,
the standalone numbers’ profitability would be depressed mainly because of
investment of Rs 7.9 bn in associates and subsidiaries. We expect redemption of
FCCB worth US$20 mn, to be funded through ECB loan, due for redemption in
May 2011.
Figure 13: PAT margin to decline
Figure 14: So also RoE and RoCE
(Rs mn)
(%)
1,800
12%
10.4%
1,600
8.7%
1,400
8.0%
1,000
5.3%
7.2%
6%
800
4%
600
200
13.4
14
12
8%
1,200
400
10%
16
2%
1,058
1,570
1,199
1,087
1,534
0%
0
FY08
10.5
8
4.6
7.4
7.3
8.4
8.2
7.3
6.3
4
1.7%
235
10
6
10.6
10.0
FY09
Adjusted PAT
FY10
FY11E
FY12E
FY13E
Adjusted PAT margin (RHS)
2
0
2.4
FY08
FY09
ROE
FY10
FY11
FY12
FY13
ROCE
CRISIL EQUITIES | 10
Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of
management quality, apart from other key factors such as industry and business
prospects, and financial performance.
Electrosteel has
experienced top and
second line of
management
Experienced management
Electrosteel has an experienced management headed by Mr Umang Kejriwal,
managing director, who has more than three decades of experience in the pipe
manufacturing business. He is supported by his brother, Mr Mayank Kejriwal,
who handles the marketing and sales functions, and nephew Mr Uddhav
Kejriwal, who handles commercial and finance verticals.
Management quick in identifying new opportunities
Electrosteel’s management has been quick in identifying growth opportunities.
The company was the first to enter the domestic DI pipes market in 1994 and is
currently the market leader. It also expanded its DI footprint to other
geographies like South East Asia, South Asia, the Middle East, Africa and Europe
which contributed ~35% to total revenues in FY10. The company has
implemented various backward integration processes like coke plant, sinter
plant, pig iron plant, etc. which have resulted in significant cost benefits. Also, it
has made investments in coking coal and iron ore mines in Jharkhand to reduce
raw material costs.
Recently, the company forayed into steel manufacturing and is in the process of
expanding its DI pipes capacity through its associate ESL.
Second line of management
Based on our interactions, we believe the company’s second line is well
experienced. Some key managerial personnel have been associated with the
company for more than two decades. The head of operations, Mr V. M. Ralli, has
been associated with the company since 1972 and has vast experience in the
field. Also, the company has recruited Mr R. S. Singh, who was previously
handling the mining operations at Tata Steel, to head its mine development and
operations vertical. Mr N. C. Bahl, who has extensive technical experience,
handles the operations of Electrosteel Steel Ltd. The company has recently
recruited a new CFO, Mr Ramanathan, who was previously the CFO of PSL Ltd.
Corporate Governance
CRISIL’s fundamental grading methodology includes a broad assessment of
corporate governance and management quality, apart from other key factors
such as industry and business prospects, and financial performance. In this
Corporate governance
practices at Electrosteel
conform to regulatory
requirement
context, CRISIL Equities analyses the shareholding structure, board composition,
typical board processes, disclosure standards and related-party transactions.
Any qualifications by regulators or auditors also serve as useful inputs while
assessing a company’s corporate governance.
Overall,
Electrosteel’s
corporate
governance
conforms
to
regulatory
requirements supported by reasonably good board practices and an independent
board.
Board composition
Electrosteel’s board consists of 12 members, of whom four are independent
directors, which is in line with the requirements under Clause 49 of SEBI’s listing
guidelines. The board is chaired by Mr P. K. Khaitan who is a non-executive,
non-independent director. The independent directors on the board are:
•
Dr. J. J. Irani, who has held senior positions in various companies, including
managing director at Tata Iron and Steel Co Ltd.
•
Mr Naresh Chandra, who has held senior posts in the Indian Civil Services
and was appointed by the Indian government to chair a committee on
corporate governance.
•
Mr Binod Khaitan, who is a retired businessman with wide experience in
industries such as plywood, tea, jute, tyre, tube, etc.
•
Mr M. B. N. Rao, who is the former chairman and MD of Canara Bank.
Board’s processes
The company’s quality of disclosure can be considered good judged by the level
of information and details furnished in the annual report, websites and other
publicly available data. The company has audit and
investor grievance
committees in place to support corporate governance practices. The audit
committee is chaired by an independent director, Mr Binod Khaitan. The
committee meets at timely and regular intervals. Though the company does not
have a remuneration committee, our interactions with the independent directors
suggest that all remuneration-related matters are discussed at the board level.
Valuation
Grade: 5/5
We have valued Electrosteel using the sum-of-the-parts (SOTP) method and
arrived at a fair value of Rs 58 per share. Consequently, we initiate coverage on
Electrosteel with a valuation grade of ‘5/5’ indicating that the current market
Fair value estimate of Rs
58 based on sum-of-theparts
price of Rs 38 per share (as on December 8, 2010) has ‘strong upside’ from
current levels.
We have used the price-to-earnings ratio (PER) method to value the standalone
business of Electrosteel. We have assigned a PER of 10x to Electrosteel’s
standalone business due to moderate growth coming mainly from the mining
activities. Based on the FY12 EPS of Rs 3.3, our fair value estimate for the
standalone business is Rs 33 per share.
Electrosteel holds 48.54% stake in the associate company Lanco Industries. We
have valued this stake at a 25% discount to market price to arrive at a one-year
fair value of Rs 3 per share
Electrosteel has made an investment of Rs 7 bn in its associate Electrosteel
Steel Ltd. (ESL). Since ESL is yet to start operations, we have valued
Electrosteel’s stake in ESL at book value to arrive at a one-year fair value of Rs
22 per share. Going forward, we expect significant value to unlock from ESL due
to captive linkages with the group mines.
Table 6: Valuation using sum-of-the-parts
Method
Value (Rs)
Standalone business
PER of 10x
Lanco Industries
25% discount to market value
33
Electrosteel Steel Ltd
Book value
22
Fair value
58
3
Source: CRISIL Equities
One-year forward P/E band
One-year forward EV/EBITDA band
(Rs)
(Rs mn)
100
40000
90
35000
80
30000
70
60
25000
50
20000
40
15000
30
6x
8x
14x
Electrosteel
Sou rce: N SE
P/E – premium / discount to NIFTY
P/E movement
8x
Jul-10
Oct-10
Jan-10
Apr-10
Jul-09
6x
Oct-09
Jan-09
Apr-09
Jul-08
4x
Sou rce: N SE
Oct-08
Jan-08
Apr-08
Jul-07
Oct-07
Jan-07
Apr-07
Jul-06
Apr-06
Jul-10
12x
Oct-10
Jan-10
Apr-10
Jul-09
10x
Oct-09
Jan-09
Apr-09
Jul-08
Oct-08
Jan-08
Apr-08
Jul-07
Electrosteel
Oct-07
Jan-07
Apr-07
0
Jul-06
0
Oct-06
5000
Apr-06
10
Oct-06
10000
20
10x
50.0
250%
45.0
200%
40.0
35.0
150%
30.0
100%
25.0
50%
+1 std dev
20.0
15.0
0%
10.0
-50%
-1 std dev
5.0
Sou rce: N SE
Jul-10
Oct-10
Jan-10
Apr-10
Jul-09
Oct-09
Jan-09
Apr-09
Jul-08
Oct-08
Jan-08
1yr Fwd PE (x)
Median
Apr-08
Jul-07
Oct-07
Jan-07
Apr-07
Oct-06
Jul-06
Jul-10
Oct-10
Jan-10
Apr-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Premium/Discount to NIFTY
Apr-06
0.0
-100%
Median PE
Sou rce: N SE
Company Overview
Kolkata-based water-infrastructure company Electrosteel manufacturres DI pipes
and fittings, and CI pipes used mainly for water supply and sewerage systems.
The company has facilities at Khardah and Haldia in West Bengal and Elavur in
Tamil Nadu. It has ~60% market share in the domestic DI pipe market. Other
Electrosteel is a waterinfrastructure company
manufacturing products for
water supply and sewerage
systems
competitors in this segment are Jindal Saw, Jai Balaji Industries, Tata Metaliks
Ltd, Electrotherm and Lanco Industries (Electrosteel has 48% holding in Lanco).
Table 7: Details of Electrosteel’s facilities
Area
Product
Khardah, West Bengal DI pipe
Haldia, West Bengal
Elavur, Tamil Nadu
280,000 TPA
Pig iron
250,000 TPA
Sinter
360,000 TPA
Power plant
3.75 MW
DI fittings
5,000 TPA
Coke
295,000 TPA
Sponge iron
60,000 TPA
Power plant
12 MW
CI pipes
Parbatpur, Jharkhand Coking coal mine
Kodolibad, Jharkhand
Capacity
90,000 TPA
Geological reserves of 231.2 mn MT
Coal washery
2 mn TPA
Iron ore mine
Lease yet to be granted
Source: Co mpan y
The company supplies DI spun pipes and DI fittings both domestically and
internationally, mainly to South East Asia, South Asia, the Middle East, Africa
and Europe. The company produces CI spun pipes for the domestic market only.
In 2005, the company was allocated a coking coal mine at Parbatpur in
Jharkhand and is in the process of developing it. It has set up a washery of 2 mn
TPA to reduce the ash from coking coal. Also, the company has been allocated
an iron ore mine at Kodilabad in Jharkhand. The consent from MOEF is awaited,
after which the mining lease would be signed and the mine developed.
Table 8: History and major developments
1959
Incorporation of Electrosteel Castings Ltd as Dalmia Iron and Steel Ltd
1994
The company set up DI pipe facility at Khardah, West Bengal with a capacity of 60,000 TPA
2002
The company acquired 46.43% stake in Lanco Industries Ltd, which manufactures DI pipes, pig iron and cement
2005
Electrosteel raised US$ 40 mn through GDR issue
The company was allocated coking coal mine with geological reserves of 231.2 mn tonnes at Parbatpur in Jharkhand
2006
The company raised US$ 75 mn through an FCCB issue
It was allocated iron ore mine with geological reserves of 91.2 mn tonnes at Kodilabad in Jharkhand
The company was allocated non-coking coal block at North Dadhu in Jharkhand to be developed under a JV
2008
The company raised US$ 77.50 through ECB
2010
The company did a QIP consisting of Rs 2,000 mn non-convertible debenture (NCD) issue and Rs 2100 mn warrant issue
The company upgraded the mini blast furnace for improved output
2011
Electrosteel Integrated Ltd, associate company of Electrosteel Castings Ltd, listed on the BSE and the NSE with an IPO of
Rs 2.5 bn
Source: Co mpan y
Business Overview
Electrosteel is in the business of manufacturing DI pipes and fittings, and CI
pipes.
DI pipes
Electrosteel has 4,60,000
tonnes per annum capacity of
DI pipes collectively with
Lanco Industries
DI pipes is the main product of Electrosteel and is used in water supply and
sewerage systems. The company has an installed capacity of 2,80,000 TPA of DI
pipes at its Khardah plant, manufacturing pipes 80-1,100 mm in diameter and
six meters in length. Lanco Industries, where Electrosteel has 48.54% holding,
has an installed capacity of 1,80,000 TPA of DI pipes.
DI fittings
DI fittings are used with DI pipes for extending the length of pipes, joining them
across distances and providing bends and/or branches. The company has an
installed capacity of 5,000 TPA of DI fittings at the Khardah plant.
CI pipes
CI pipes are used in water supply, sewerage systems and in the ash handling
systems of thermal power stations. The company has an installed capacity of
90,000 TPA of CI pipes at the Elavur plant. These pipes have diameters ranging
from 80–1,000 mm and length ranging from 4 meters to 5.5 meters.
The company gets most of its orders for DI fittings and pipes, and CI pipes by
bidding for contracts. Most of these contracts do not have a price escalation
clause in case the tenure of the contract is long.
Raw materials, logistics and utilities
Raw material
The main raw materials used in the manufacture of DI pipes and fittings, and CI
pipes are iron ore and coke. Electrosteel sources iron ore from mines in Orissa at
the market rate and imports coking coal from Australia at quarterly contracts.
The company currently
sources iron ore from Orissa
and coking coal from
Australia
Logistics
The company has outsourced logistics activities to a third party. Also, it is in the
process of setting up railway sidings facilities for movement of material from the
Parbatpur coal coking
coal
mine
and
Kodolibad
iron
ore
mine
to the
manufacturing facilities. The company has already acquired two wagon rakes
from Indian Railways for this purpose.
Power
The power requirement at the Khardah unit is ~23 MW, most of which is
supplied by CESC Ltd. The company also has a 3.75-MW steam turbine captive
power plant at Khardah which uses the waste gasses from the mini blast
furnace. The Khardah plant also has three 1.1 MW diesel generators as back-up
arrangement.
The company’s 12-MW captive power plant at the Haldia facility uses the heat
generated from the coke ovens and sponge iron plants. The power requirement
at the plant is only 2 MW and the balance power is sold to West Bengal State
Electricity Board.
The total power requirement at the Elavur facility is 1 MW which is supplied by
the Tamil Nadu State Electricity Board. The facility also has two 0.79 MW diesel
generators and one 0.5 MW diesel generator as standby.
Annexure: Financials
Table 9: FINANCIAL STATEMENTS
Income statement
(Rs mn)
Operating income
EBITDA
EBITDA margin
Balance Sheet
FY08
13,976
1,143
8.2%
FY09
19,976
FY10
15,029
FY11E
FY12E
FY13E
14,892
15,161
17,558
3,397
3,129
2,520
2,550
3,715
Equity share capital
20.8%
16.9%
16.8%
21.2%
Reserves
Depreciation
366
521
523
431
532
797
777
2,876
2,606
2,089
2,018
2,918
Interest
918
1,331
87
711
632
837
1,545
2,519
1,379
1,386
2,081
411
237
209
Total debt
-
-
-
Deferred tax liability (net)
Other income
444
200
67
205
249
453
PBT
509
1,994
3,039
1,789
1,622
2,290
68
687
1,016
Tax provision
Minority interest
PAT (Reported)
Less: Exceptionals
Adjusted PAT
Minorities
Net worth
(141)
Exceptional inc/(exp)
590
535
756
-
-
-
-
-
-
440
1,308
2,023
1,199
1,087
1,534
205
249
453
235
1,058
1,570
-
-
-
1,199
1,087
1,534
FY09
FY10
FY11E
FY12E
FY13E
Liabilities
17.0%
EBIT
Operating PBT
(Rs mn)
Convertible debt
Other debt
Total liabilities
287
327
327
327
327
13,634
15,511
16,475
17,350
18,573
-
-
13,921
-
15,838
-
16,802
-
17,677
18,900
-
-
-
-
-
10,077
12,419
11,273
9,793
8,812
10,077
12,419
11,273
9,793
8,812
369
470
470
470
470
24,367
28,727
28,544
27,939
28,182
Assets
Net fixed assets
5,069
5,246
5,065
4,783
8,986
Capital WIP
2,961
3,910
4,160
5,410
1,910
Total fixed assets
Investments
8,030
9,156
9,225
10,193
10,896
7,205
10,242
10,420
9,120
9,120
Current assets
Ratios
FY08
FY09
FY10
FY11E
17.4
42.9
(24.8)
(0.9)
FY12E
FY13E
Growth
Operating income (%)
1.8
15.8
Inventory
3,245
3,567
3,739
3,889
4,089
Sundry debtors
6,232
4,129
4,091
4,165
4,824
Loans and advances
1,390
1,820
1,504
1,531
1,774
860
2,809
2,784
2,322
1,082
Cash & bank balance
EBITDA (%)
(39.4)
197.3
(7.9)
(19.5)
1.2
45.7
Marketable securities
Adj PAT (%)
(70.3)
350.2
48.3
(23.6)
(9.3)
41.1
Total current assets
Adj EPS (%)
(78.0)
339.6
30.4
(23.6)
(9.3)
41.1
Profitability
8.2
17.0
20.8
16.9
16.8
21.2
Adj PAT Margin (%)
1.7
5.3
10.4
8.0
7.2
8.7
11,768
2,594
2,996
3,219
3,281
3,602
9,133
9,329
8,899
8,626
8,166
24,367
28,727
28,544
27,939
28,182
Total assets
2.4
8.2
10.5
7.3
6.3
8.4
4.6
13.4
10.0
7.4
7.3
10.6
(Rs mn)
RoIC (%)
13.3
16.6
9.7
13.3
11.3
14.4
Pre-tax profit
Valuations
53.1
4.0
11.0
10.2
11.3
8.0
Cash flow
521
523
431
532
797
(1,132)
1,753
404
(189)
(780)
618
3,947
2,034
Working capital changes
1.1
0.7
0.7
0.6
Net cash from operations
7.9
7.2
7.3
5.1
Cash from investments
1.7
1.3
1.3
1.1
16.7
16.7
17.3
2.7
9.2
2.4
1.6
1.5
2.2
2,290
Depreciation
0.3
20.2
FY13E
1,622
(535)
3.4
0.6
FY12E
1,789
(590)
1.1
29.9
FY11E
(916)
15.0
1.3
FY10
2,586
(516)
Price-book (x)
76.1
FY09
1,745
Total tax paid
EV/EBITDA (x)
Dividend yield (%)
11,907
Total current liabilities
RoE (%)
EV/Sales (x)
12,118
Net current assets
RoC E (%)
Dividend payout ratio (%)
12,325
Intangibles/Misc. expenditure
EBITDA margin (%)
Price-earnings (x)
11,726
(756)
1,430
1,552
(1,500)
Capital expenditure
(3,013)
(1,649)
(500)
(1,500)
Investments and others
(2,516)
(3,037)
(178)
1,300
-
(5,529)
(4,686)
(678)
(200)
(1,500)
Net cash from investments
Cash from financing
B/S ratios
Inventory days
C reditors days
Equity raised/(repaid)
110
89
134
136
139
131
Debt raised/(repaid)
84
41
57
60
60
60
Debtor days
168
135
113
109
109
108
Dividend (incl. tax)
Others (incl extraordinaries)
Working capital days
178
141
180
155
150
139
Net cash from financing
Gross asset turnover (x)
2.4
2.9
1.9
1.8
1.7
1.5
Change in cash position
Net asset turnover (x)
3.8
4.4
2.9
2.9
3.1
2.6
Closing cash
2.95
2.96
1.76
1.63
1.57
1.67
Sales/operating assets (x)
4.0
5.3
4.9
4.5
4.0
3.6
Debt-equity (x)
C urrent ratio (x)
60.1
72.4
78.4
67.1
55.4
46.6
(Rs mn)
Net debt/equity (x)
39.0
52.4
46.0
35.6
35.5
34.6
Net Sales
0.8
2.2
29.9
2.9
3.2
3.5
Interest coverage
Change (q-o-q)
Change (q-o-q)
FY08
FY09
FY10
Adj EPS (Rs)
0.8
3.7
4.8
3.7
3.3
4.7
PAT
C EPS
2.1
5.5
6.4
5.0
5.0
7.1
Adj PAT
Book value
FY11E
FY12E
FY13E
1,249
-
-
2,342
(1,147)
(1,480)
(980)
(235)
(212)
(311)
(457)
1,318
4,044
(476)
(426)
2,689
(867)
1,950
860
2,809
0
(1,381)
(25)
2,784
-
-
-
(1,692)
(1,291)
(462)
(1,240)
2,322
1,082
Quarterly financials
EBITDA
Per share
200
2,984
EBITDA margin
42.1
48.5
48.5
51.4
54.1
57.8
Dividend (Rs)
1.2
1.4
1.2
1.3
1.3
1.3
Adj PAT margin
Change (q-o-q)
Actual o/s shares (mn)
281
287
327
327
327
327
Adj EPS
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
3,782
4,160
3,461
3,689
4,322
-3%
1,104
10%
1,162
-17%
468
7%
17%
665
768
5%
5%
-60%
42%
15%
29.2%
27.9%
13.5%
18.0%
17.8%
630
644
205
301
386
630
644
205
301
386
8%
2%
-68%
47%
28%
16.7%
15.5%
5.9%
8.2%
8.9%
0.6
0.9
1.2
1.9
2.0
Source: Co mpan y, CRISIL Equ ities estimate
Focus Charts
Contribution from exports has grown
Geographic break-up of export revenues – FY10
Others, 6%
100%
90%
31.4%
80%
25.3%
31.4%
34.6%
UK, 10%
31.5%
33.0%
Algeria, 24%
70%
60%
Spain, 19%
50%
40%
68.6%
30%
74.7%
68.6%
65.4%
68.5%
67.0%
20%
France, 14%
10%
Singapore, 4
%
0%
FY08
FY09
FY10
FY11E
Domestic revenue
FY12E
Middle
East, 23%
FY13E
Algeria
International revenue
France
Middle East
Sou rce: Com pan y
DI pipes to be the main revenue contributor
EPS and EPS growth
Singapore
Spain
UK
Others
(Rs )
100%
11.3%
90%
8.9%
8.9%
5.0
15.5%
400%
339.6%
4.5
350%
4.0
300%
70%
3.5
250%
60%
3.0
200%
2.5
150%
28.2%
80%
74.7%
50%
78.9%
79.6%
60.1%
40%
74.2%
2.0
30%
1.5
20%
1.0
10%
0%
8.9%
2.8%
10.9%
FY09
DI fittings
3.2%
8.6%
3.6%
7.8%
3.7%
6.8%
3.5%
FY10
FY11E
FY12E
FY13E
CI pipes
DI pipes
-78.0%
-23.6%
0.8
0.5
3.7
4.8
0%
3.7
3.3
-100%
FY08
FY09
FY10
FY11E
EPS
Others
FY12E
FY13E
EPS Growth(RHS)
Total returns analysis
Stock movement vs. market
Shares Bought
10
Price per share
432
Investment made
FY06
FY07 FY08* FY09 FY10
Total dividend income
400
350
4319
Dividend per share
-50%
4.7
0.0
1-Apr-05
50%
-9.3%
(Rs)
100%
41.1%
30.4%
300
12.5
12.5
1.2
1.4
1.2
125
125
119
136
125
250
200
100
5.69
50
Electrosteel Castings Ltd.
Sou rce: N SE, CR ISIL Equ iti es
Oct-10
Jan-10
May-10
Apr-09
Sep-09
Jul-08
Dec-08
Oct-07
Mar-08
Jun-07
0
Feb-07
*1:10 stock split on 17 September 2007
Sep-06
0.3%
Jan-06
Yearly return
1.4%
May-06
Holding period - Years
Apr-04
Total return (%)
150
Apr-05
62
Sep-05
Total return
Dec-04
38
Aug-04
C urrent market price
NIFTY
Sou rce: N SE
CRISIL Independent Equity Research Team
Mukesh Agarwal
Director
+91 (22) 3342 3035
magarwal@crisil.com
Tarun Bhatia
Director, Capital Markets
+91 (22) 3342 3226
tbhatia@crisil.com
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Head, Equities
+91 (22) 3342 4148
chetanmajithia@crisil.com
Sudhir Nair
Head, Equities
+91 (22) 3342 3526
snair@crisil.com
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Director, Research
+91 (22) 3342 3536
nnarasimhan@crisil.com
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Head, Research
+91 (22) 3342 3567
adsouza@crisil.com
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Head, Research
+91 (22) 3342 3554
mmohta@crisil.com
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Head, Research
+91 (22) 3342 3541
smathur@crisil.com
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Head, Research
+91 (22) 3342 3546
sridharc@crisil.com
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Electrosteel Castings Ltd

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