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Attractive valuation, and resurgent steel industry give IMFA a shine

In the last 12 years, it has never had a negative cash flow from operation. Since operating cash has always been higher than the reported profits, the quality of the earnings has been good.

July 20, 2017 / 12:53 PM IST
 
 
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Jitendra Kumar GuptaMoneycontrol Research

Demand for ferro chrome, a key ingredient which gives a strong, shining and non-rusty surface to the steel, has grown faster because of newer applications of stainless steel like automobile, aviation, construction, home improvement and many more.

Indian Metals & Ferro Alloy (IMFA), the largest Indian integrated player (having its own ore mines with reserves of about 21 million tonnes or 35 times its current mining production at about 6 lakh tonnes) in this space, has been a key beneficiary of this steel cycle. Over the last 12 years, it has grown its revenues at 16 percent annually.

It is also one of the quality players in the metal space. In FY17, it generated over 23 percent return on equity and 32 percent operating margins with debt to equity ratio at a comfortable level of less than one time and interest coverage of 5 times.