Buy Electrosteel Castings; target of Rs 72: Angel

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Angel Securities is bullish on Electrosteel Castings and has recommended buy rating on the stocks with a target of Rs 72, in its March 17, 2010 research report.

"We like Electrosteel Castings' inititatives of gradually venturing into steel making through its subsidiary EIL which is setting up a 2.2mn tonne steel plant expected to be commissioned by FY2012E. In addition, the company's backward integration initiatives through allocation of coking coal mines are expected to result in EBITDA Margin expansion by 1,304bp to 28.0% over FY2009-12E. The company is also awaiting final environmental clearance for its iron ore mine, which will further lower costs, but has not been factored in our estimates. Further, listing of EIL could result in a value unlocking for ECL shareholders. We Initiate Coverage on the stock with a Buy recommendation and  18-month SOTP Target Price of Rs 72, valuing the Core business at 8x FY2012E  FDEPS and its investments in the Steel business at 1x Book Value."

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