Buy Adhunik Metaliks; target of Rs 150: MLR Securities

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Buy Adhunik Metaliks; target of Rs 150: MLR Securities

MLR Securities is bullish on Adhunik Metaliks (AML) and has recommended buy rating on the stock with a target of Rs 150 in its April 5, 2011 research report.

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MLR Securities is bullish on Adhunik Metaliks (AML) and has recommended buy rating on the stock with a target of Rs 150 in its April 5, 2011 research report.

"Adhunik Metaliks (AML) is into alloy steel manufacturing. It also has significant presence in mining and power sectors through its subsidiaries."

"Increasing volumes from merchant iron ore and manganese ore mines to boost revenue. Moving up the value chain, product mix shifting to higher value added products like auto steel and structural steel. Cost efficient and integrated process for production of captive power, pig iron , sponge iron ,ferro alloy, billets and rolled products. Captive coal and iron ore mines to provide backward integration, improve EBITDA margin from steel business. New pellet plant to help improve blended realization from the iron ore segment. 540 MW Jharkhand IPP to become operational in phases from Q1FY13, captive coal mine and tapering linkage received."

"We believe that the new captive and merchant iron ore mines will boost the revenue and profitability going ahead from Q1FY12 and recommend a buy with a target price of INR 150. The stock is currently trading at an EV of 6.4 and 4.8 x FY11e and FY12e EBITDA respectively. We have valued the steel & mining business at INR 128/share (target EV of 4.5 x FY12e EBITDA, excluding the debt of power subsidiary), the power business is valued at INR 22/share (at 45 mn/mw)," says MLR Securities research report.

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