Buy Foseco India; target of Rs 785: Firstcall Research

“Foseco, has been associated with the metals Industry for over 75 years and today is acknowledged as a world leader in the supply of consumable products for use in the foundry industry with a presence in 32 countries and major facilities in Germany, USA, UK, Brazil, China, India, South Korea and Japan. The Company was founded by Eric Weiss in 1932 and quickly became established as a supplier to the Foundry Industry, from where the name FOundry SErvice COmpany was derived. In April 2008, Foseco was acquired by Cookson Group Plc., with interests in metals, electronics and ceramics. Foseco is a part of the Ceramics (Vesuvius) division of the group. Foundries form the heart of any manufacturing based economy. There are approx. 4700 ferrous and 1000 nonferrous foundries out of which 80% can be classified as small-scale units and 10% each as medium and large-scale units. Foundries typically produce castings that go into different user segments. These segments can be broadly classified into automotive, construction, heavy machinery, general engineering and mining. The processes in each foundry have unique characteristics, so customers need to be provided specific customized solutions.”

“FOSECO India Ltd has reported net profit of Rs 66.31 million for the quarter ended on December 31, 2011 as against Rs. 53.44 million in the same quarter last year, an increase of 24.08%. It has reported net sales of Rs 602.55 million for the quarter ended on December 31, 2011 as against Rs 547.18 million in the same quarter last year, a rise of 10.12%. Total income grew by 9.47% to Rs 606.48 million from Rs. 554.02 million in the same quarter last year. During the quarter, it reported earnings of Rs 10.38 a share.”

“At the current market price of Rs.701.00, the stock is trading at 15.01 x CY12E and 13.23 x CY13E respectively. Earning per share (EPS) of the company for the earnings for CY12E and CY13E is seen at Rs.46.69 and Rs.53.00 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 21% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 9.17 x for CY12E and 8.10 x for CY13E. Price to Book Value of the stock is expected to be at 3.96 x and 3.05 x respectively for CY12E and CY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 785 for medium to long term investment,” says Firstcall Research report.  

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