Centrum's research report on Tata Metaliks
Exciting future growth prospects await TML’s fast growing business of ductile iron (DI) pipes which faces limited competition, has solid demand drivers and strong entry barriers. With recent commissioning of growth-accretive and cost efficient projects offering quick paybacks, TML is set to take the next leap in profitability and deliver EBITDA/PAT CAGR of 18%/19.2% over FY16-19E. TML’s cash flow yield stands at attractive levels of 12.0%/17.5% on FY18E/19E basis, meriting a re-rating.
Outlook
We initiate coverage on Tata Metaliks (TML) with a Buy rating and TP of Rs 570 as we are impressed by its remarkable evolution from a struggling, loss making and heavily indebted commodity play (FY12) to a financially sound, cost efficient and fast growing niche product franchise (FY16). We view this paradigm shift in fortunes as an unparalleled “Metamorphosis” which has been driven by superior management actions and prudent capital allocation.
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