Buy Electrotherm; target of Rs 450: Sunidhi Securities

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Buy Electrotherm; target of Rs 450: Sunidhi Securities

Sunidhi Securities is bullish on Electrotherm (India) (EIL) and has recommended buy rating on the stock with a target of Rs 450 in its September 30, 2010 research report.

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Sunidhi Securities is bullish on Electrotherm (India) (EIL) and has recommended buy rating on the stock with a target of Rs 450 in its September 30, 2010 research report.

"Electrotherm (India) (EIL), a market leader in induction furnaces caters to ferrous & non-ferrous foundries and metal melting industry. It manufactures medium frequency induction melting furnaces, induction heating and hardening equipment, DC arc furnaces and DI pipes etc. It is also in power generation and electric vehicles. The current product portfolio of electric vehicles division includes battery operated scooters, rickshaws and bicycles. EIL has its own steel plant with an installed capacity of 3, 14,000 tpa, ductile iron pipe plant with an installed capacity of 1, 50,000 tpa, coal based DRI (Sponge & Pig Iron) plants with an installed capacity of 2, 86,000 tpa and mini blast furnaces as well." 

"EIL has plans to enter into green & renewable power generation business and to install both wind mills and solar power energy for both captive and commercial purpose. The company is working on installing a 40 MW solar plant in Gujarat which is expected to be completed by the end of 2013. EIL has been allotted a non-coking coal block in Chhattisgarh during late 2008 in an equal sharing with Grasim Industries (now with Samruddhi Cements). The total reserve block of mine is 46.9 mmt, which will ensure energy security for Electrotherm's iron production facility and its captive power plant. The block is expected to become operational in mid 2013." 

"EIL is likely to post an EPS of Rs 52 in FY11 and Rs 63 in FY12. At the CMP of Rs 320, the share is trading at a P/E of 6.2x on FY11E and 5.1x on FY12E. We recommend BUY with a target of Rs 450 in the medium term," Sunidhi Securities research report.

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To read the full report click on the attachment