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  esult Update

Specialty Steel - Alloys

June 4, 2007

  dhunik Metaliks

OUTPERFORMER

Target Price

Rs 75

Time Frame

12 months

  ICICIdirect Code: ADMET

Com!an" Pro#i$e

Registered O##ice

Landsdowne Towers,2/1A Sarat ose !oad,"ol#ata - 700 020$est en%alTel& '1-((-(0)17100www*ad+uni#%roup*co

ana%in% .irector& Mano% & Agar'a$usiness roup& Adh(ni) *ro(!

+hareho$ding Pattern ,1-.,-2..7

aor older

3rooters 4*02

5nstitutional 5nvestors 11*0)

6t+er 5nvestors 1)*))

eneral 3ulic '*(8

+toc) Data

ar#et 9ap :!s cr; )07*)

S+ares 6utstandin% :crore; '*12(

)2-wee# i%+ :!s; 2

)2-wee# Low :!s; 2

Avera%e <olue 74,8(2

Asolute !eturn ( :; )'*04

Asolute !eturn 12 :; (0*8'

Sense= !eturn ( :; *82

Sense= !eturn 12 :; (2*

Per#ormance Chart

Ad+uni# etali#>s Jan-arc+ 2007 ?uarter results were aove our

e=pectation wit+ copany postin% a 28 up in otto line to !s 21*)8crore a%ainst !s 1*' crore pro@its a year a%o on t+e ac# o@ iprovedar%ins and +i%+er s+are o@ value-added products* Sales were @lat at !s188*02 crore :!s 184*( crore; due to s+arp dip in tradin% sales w+ic+ wewere anticipatin% as it is a non-core area and a low-ar%in usiness*

$e +ad recoended t+e stoc# at t+e !s (7 levels and it is tradin% aoveour tar%et price o@ !s )2*)0* $e were conservative in our estiates and +advalued t+e copany at F08 estiates* $e now elieve t+at t+e copanyis ta#in% pro%ressive strides in de-ris#in% its usiness odel t+rou%+ac#ward inte%ration and @orayin% into +i%+-ar%in, value-added productssuc+ as stainless steel and rolled products w+ere realiBations are less

volatile* $e reiterate our outper@orer ratin% and value t+e stoc# at )=F0'C C3S o@ !s 1)*02, w+ic+ %ives us tar%et price o@ !s 7), an upside o@40 @ro current levels*

RE+U/T+ I*/I*T+

.urin% t+e ?uarter, t+e copany posted a ar%inal up in net salesto !s 188 crore as tradin% sales were lower at !s )(*2( crorecopared to !s )*0 crore in t+e correspondin% ?uarter last year*anu@acturin% sales rose @ro !s 11' crore to !s 1(( crore durin%t+e sae period*

T+e copany posted a up o@ 8 in steel volues @or F07 at228,)0) tonnes a%ainst 211,207 tonnes in F0* T+is alon% wit+ an

iproved product i= towards value-added products suc+ as rolledproduct and +i%+er realiBations +elped it lo% a 74 up in sales to!s 7()*7) crore :!s 42(*78 crore;*

C5.TA ar%ins were @lat at 17*) :17*(4; durin% F07 due to+i%+er ot+er e=penses on account o@ conversion and additional @rei%+t e=penses o@ !s 1(*18 crore and !s )*'2 crore alon% wit+ L9c+ar%es o@ !s 1*7 crore, provision o@ !s 2*) crore* $e e=pect t+ecopany to save t+ese conversion c+ar%es a@ter its rollin% ill %oesonstrea in F08*

T+e copany douled its net pro@it durin% t+e year to !s 77*4 crore

:!s ((*70 crore; due to an iproved product i= @ro spon%e D pi%5ron and illets to rolled products t+at o@@er uc+ +i%+er ar%in* 

E0hiit 1: &e" Financia$s 2Rs crore3 

4ear to March ,1 6F4.7

6F4.

8 chg9 F4.7 F4.E F4.;E

Eet Sales 188*02 184*( 2 7()*7) 101*0 1180*4

6t+er 5ncoe (*'( 1*47 17 8*(2 0*2) 0

!aw aterials )(*(7 ))*27 -( (''*81 )1*74 ))0*1

C.5TA 28*)7 (2*0( -11 12(*2' 24*14 287*4

.epreciation 2*' 2*) 18 11*(4 ()*8 (4*2

5nterest 7*(1 4*'' 4 2*18 8*1) )'*2

Ta= -(*27 7*) -14( 8*(1 22*4 )*)Eet 3ro@it 21*)8 1*' 28 77*4 11'*77 1(7

C?uity '1*2( '1*2( '1*2( '1*2( '1*2(

C3S :!s; 2*(7 1*8) 8*4' 1(*1( 1)*02

+o(rce: ICICIdirect Research 

Pan)a% Pande"

pan#a*pandeyicicidirect*co

59595 Securities Liited,2nd Floor, Stanrose ouse,Appasa+e arat+e !oad,3ra+adevi, uai-400 02)

1

C(rrent Price

Rs 55

Potentia$ U!side

,8

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Re<en(e mi0 to im!ro<e

$e e=pect copany>s revenue to %row at a 9A! o@ 40*(( durin% F0-0'C to !s 1171*14crore on t+e ac# o@ +i%+er contriution @ro +i%+ value-added products suc+ as rolled productsand stainless steel* T+ese products are e=pected to contriute 44 and 40 to top line

respectively*

E0hiit 2: Re<en(e mi0

(

27

(7

1)

('

4

42

11

4(

1)

0

(2

12

(4

20

0

(2

12

4(

1'

0

2

12

('

1)

((

0

1(

40

(4

12

1

10

44

40

)

0

10

20

(0

40

)0

0

70

80

'0

100

FA0 G1FA07 G2FA07 G(FA07 G4FA04 FA07C FA08C FA0'C

Spon%e D 3i% 5ron illets !olled 3roducts Stainless Steel Tradin% D 6t+ers

+o(rce: Com!an"= ICICIdirect Research 

E0hiit ,: +a$es <o$(me

+o(rce: Com!an"= ICICIdirect Research 

OTER I*/I*T+

Ad+uni# etali#s +as ac?uired 100 sta#e in 6rissa an%anese D inerals 3rivate Ltd, w+ic++as t+e inin% ri%+ts @or reserves o@ 1) illion tonnes @or an%anese ore and () illiontones @or iron ore* an%anese production is e=pected to coence durin% G2F08 and ironore production durin% G4F08* $e e=pect t+e copany to sell additional an%anese D ironore a@ter eetin% captive re?uireent, t+e @ull ene@its o@ w+ic+ would e realiBed in F0'*owever, we +ave not included t+e in our estiates due to non-availaility o@ data*

Hnistar alvanisers D Faricators 3rivate Ltd, a w+olly-owned susidiary o@ t+e copanya%%ed an order wort+ !s )( crore @or t+e anu@acture and supply o@ copletetelecounication towers* ere also, we +ave +ave not @actored in t+e ene@its in ourestiates due to lac# o@ data, ut we reain ullis+ on t+e %rowt+ prospects o@ t+e copany*

+a$es t" F4. 1.7 2.7 ,.7 6.6 F4.7E F4.:E F4.;E

Spon%e D 3i% 5ron 10),'2)  )21  -  1,2'0  -  1811 -  - 

illets 10),282  17,)1(  12,4((  14,748  14,7)  )'4)8 ),(8)  )),28( 

!olled 3roducts -  (1,227  (),0(4  (2,04(  (,(()  1(4(' 1)7,18  18',1)( 

Stainless Steel -  2,212  8,8)  11,(4  10,()4  (2)'7 8,70'  87,'1 

Tota$ 211=2.7  22:5.69: 2;1=2:.  ,,2=127 

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>A/UATIO?+

$e e=pect t+e copany to ore t+an doule its top line and ?uadruple its otto line durin% F0-0'C on t+e ac# o@ capacity e=pansion into +i%+-ar%in, value-added products alon% wit+ ac#ward

inte%ration into critical raw aterial suc+ as iron ore and coal* $e elieve t+ese initiatives wouldresult in si%ni@icant de-ris#in% o@ its usiness odel* T+e stoc# +as rid%ed t+e valuation di@@erential tocertain e=tent, ut still does not capture t+e entire ene@its @ro ac#ward and @orward inte%ration*$e still @ind t+e stoc# very attractive at t+e current price o@ !s )), w+ic+ trades at (*= F0'C C3S o@!s 1)*02 and an C</C5.TA o@ (*= F0'C, w+ic+ we @eel is at t+e lower end o@ t+e 3/C ultipleand* $e are up%radin% our tar%et price to !s 7) ta#in% a ultiple o@ )= its F0' C3S, w+ic+ %iven usan upside potential o@ ( @ro current levels*

E0hiit 6: >a$(ation

4ear to March ,1 F4. F4.7 F4.E F4.;E

C3S :!s; (*70 8*4' 1(*1( 1)*02

rowt+ 1(0 )) 14

3/C :=; 14*88 *48 4*1' (*C</C5.TA :=; 8*1 7* 4*0' (*1

!oE$ :; 1)*(' 27*') (0*'' 27*)4+o(rce: Com!an"= ICICIdirect Research 

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RATI?* RATIO?A/E

59595.irect endeavours to provide oective opinions and recoendations* 59595direct assi%ns ratin%s to itsstoc#s accordin% to t+eir notional tar%et price vs current ar#et price and t+en cate%orises t+e as

6utper@orer, 3er@orer, old, and Hnderper@orer* T+e per@orance +oriBon is 2 years unless speci@ied andt+e notional tar%et price is de@ined as t+e analystsI valuation @or a stoc#*

O(t!er#ormer: 20 or orePer#ormer: etween 10 and 20o$d: K10 returnUnder!er#ormer: -10 or ore*

arendra &(mar ead @ Research and Content harendra9)(maricicidirect9com

ICICIdirect Research Des)=

ICICI +ec(rities /imited=

2nd F$oor= +tanrose o(se=

A!!asahe Marathe Marg=

Prahade<i= M(mai B 6.. .25

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