CRISIL maintains valuation grade of 5/5 to Electrosteel

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26 Aug, 2025 12:21

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CRISIL Research has come out with its report on Electrosteel Castings (ECL). According to the research firm, the company is expected to be able to secure approvals and start mining of iron ore by Q4FY13, which will provide significant cost savings.

ECL's Q2FY13 revenues and profitability were in line with CRISIL Research’s expectations. Increase in DI pipe exports boosted revenues whi le EBITDA margin expanded significantly because of foreign exchange gains on account of favorable currency movement. ECL is setting up a 2.5 mn MTPA steel plant through its steel associate - Electrosteel Steels Ltd (ESL). The profitability of this plant is dependent on ECL’s coking coal and iron ore mines. We maintain our earnings estimates and the fundamental grade of 3/5, indicating that its fundamentals are good relative to other listed securities in India.

Healthy growth in exports boosted total revenues
Sales volume of exported DI pipes was up by 19% y-o-y and 32% q-o-q to 45,849 tonnes in Q2FY13 due to ECL’s focus on global markets. Export realisation increased 6% y-o-y but remained flat q-o-q at Rs 54,091 per tonne. Hence, the sale of exported DI pipes grew by 27% y-o-y and 34% q-o-q to Rs 2,480 mn. Due to ECL’s focus on international markets, the share of domestic sales in total sales is on a decline. Sales volume of DI pipes sold in the domestic market fell by 15% y-o-y but was up 4% q-o-q to 25,855 tonnes. Domestic realisation declined y-o-y (6%) and q-o-q (8%) to Rs 44,866 per tonne due to tepid demand. Consequently, domestic sales of DI pipes declined 20% y-o-y and 4% q-o-q to Rs 1,160 mn. Total revenues grew 8% y-o-y and 10% q-o-q to Rs 4,939 mn, driven by export sales.

EBITDA margin improved largely due to forex gains; PAT in line with EBITDA
EBITDA margin improved 7 percentage points (pps) y-o-y and 14 pps q-o-q to 16.5% due to foreign exchange gains and lower raw material cost: a) ECL booked Rs 270 mn gain because of favorable currency movement, and b) raw material cost as a % of sales decreased 124 bps y-o-y and 39 bps q-o-q due to lower cost of coking coal (declined 22% y-o-y and 8% q-o-q to Rs 9,946 per tonne). ECL reported profit of Rs 370 mn against a loss of Rs 173 mn in Q1FY13 and profit of Rs 194 mn in Q2FY12.

Commenced commercial production from blast furnace and the TMT bar facility
ECL is setting up a 2.5 mn MTPA steel plant through ESL in Jharkhand. It has already started the commercial production of pig iron and TMT; commercial operation of coke oven and sinter plant has also started. ESL intends to use coking coal (30% of total requirement) and iron ore (100% of total requirement) from ECL’s mines. We expect ECL to be able to secure approvals and start mining of iron ore by Q4FY13, which will provide significant cost savings.

Fair value maintained at Rs 45, current market price has strong upside
We continue to value ECL by the sum-of-the-parts (SOTP) method at Rs 45 per share. At the current market price of Rs 26, our valuation grade is 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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