Rathi Steel and Power Ltd. REPORT DATED 7th JUNE 2008

8/14/2019 Rathi Steel and Power Ltd. REPORT DATED 7th JUNE 2008

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www.nift iews.comCompany Overview:-

Rathi steel and power limited( Formerly rathiudyog limited) is a 35 years old steelcompany. The company is owned andoperated by Punam chand Rathi and his sonPradeep Rathi .

The company originally started itsproduction in 1972 with the first rolling millin Ghaziabad in Uttar pradesh.In 2001company started the production of ThermexTmt bars under Rathi brand.Thecompanys ghaziabad plant had an installedcapacity of 125000 tonnes per annum in2005 and 40000 tonnes of rolling capacity..

"Rathi steel and power plant in Ghaziabad isin the manufacture of long productsincluding bars, wire rods, angles andchannels which form the skeleton of allkinds of construction. With the huge amountof investments initiated and awaited in theconstruction industry, the demand for theseproducts, which are to the tune of 20-25% ofthe total investment, seems to be a no lookback at least for the next five-seven years.

In 2005 the company signed a MOU with theGovernment of Orissa for setting up a 0.3mtpa sponge iron, steel billets and captivepower plant by taking advantage of theIndustrialization policy of the stategovernment and the abundant supply of coaland iron available in the vicinity.

The Orissa project has been set up on 250acres of land in sambhalpur in orrisa.Theplant is to be constructed in two phases withthe first phase of 150000 tonnes per annumof sponge iron and 30Mw of captive powerplants.The second phase has an almostsimilar capacity expansion

KEY STATS:-

CMP-20.5

ORIGINALRECOMMENDATION

PRICE 24.8

BSE CODE: -504903

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TEAM

STOCKRESEARCHERSPvt. Ltd.

3 SUBHASHNAGAR CORNER,RAIYA ROAD,

RAJKOT, Gujarat, 360007

www.niftyviews.com

CONTACT:09327744250

CST NUMBER: AADCT0544JST001

DATE:07.06.2008


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Over the years company has

been a dividend payingcompany. Moreover at theCmp of Rs 20.5 the stock istrading at 60% discount to itsIpo price of 50 rs. Althoughthe main trigger for ourrecommendation is not thesteep discount on the Ipoprice.

Two of our earlier

recommendations in the verysame space Jayasawals necoat 17 levels and Mspl at 18levels. (Refer the premiumclients mailer.) wereMultibaggerrecommendations. We expectsomething similar for Rathisteel and power going ahead.Read the full report to knowmore about the same.

Rathi turnover in FY08 was517 crs and 30% of it wastrading turnover. Goingforward in FY09E turnover is730 crs. Rathi has a smallequity base of 24 crs dividedinto 2.4 crs shares. The 0PMis currently 4% and NPM is of1%.Expect the same to getimproved as the expansion ofthe company after an years

delay is now operational withfull capacity.

Investment Rationales:Investment Rationales:Investment Rationales:Investment Rationales:----

The current capacity of thecompany in sambhalpur is

150000 tones of sponge ironand steel billets plant alongwith 30 MW captive coalblock.

The reason I expect the OPMand NPM to improve is thatthe company is now beingallotted captive coal linkages.If Long-term investors andclients of TeamStockResearchers remember

one of our picks MSPL hadalso moved vertically after itwas allotted a coal block inconsortium.

The company is getting LOAfor its captive power plant of30MW and 75% of its requiredquantity of 240000 tones forits sponge iron plant.

We expect the LOA to beannounced in next 3-5

months. Once the companygets the coal linkages for itssponge iron and power plantis approved. We can expect avertical move in the stock.


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MANDATORY DISCLOSURES:This document is for information only and is meant for the use of the Recipient & not for circulation.

The information contained in this document has been taken from publicly available information tradeand statistical services & other sources. While the information contained herein is from sources believed to bereliable, we do not hold ourselves responsible for its Completeness andaccuracy. All opinions and estimates included in this report constitute our judgment as of this date and are

Subject to change without notice. Investors are expected to use the information contained in this report at theirown risk. This report is not and should not be construed as an offer or the Solicitation of an offer to buy or sell anysecurities. TEAM STOCKRESEARCHERS and its affiliates may act as market maker or have assumed an underwriting

position in the securities of companies discussed herein and may sell them to or buy them from

customers on a principal basis..


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Financial synopsis:Financial synopsis:Financial synopsis:Financial synopsis:----BSE: 504903 NSE: N.A ISIN: INE336C01016

Industry : Steel Rolling

Yearly Results ------------------- in Rs. Cr. -------------------

Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

Sales Turnover 187.57 282.14 299.78 401.60 517.88

Other Income 0.14 0.21 0.11 0.65 0.53

Total Income 187.72 282.35 299.89 402.25 518.41

Total Expenses 183.61 275.28 282.93 383.38 494.26

Operating Profit 3.96 6.86 16.85 18.22 23.62

Profit On Sale Of Assets -- -- -- -- --

Profit On Sale Of Investments -- -- -- -- --

Gain/Loss On Foreign Exchange -- -- -- -- --

VRS Adjustment -- -- -- -- --

Other Extraordinary Income/Expenses -- -- -- -- --

Total Extraordinary Income/Expenses -- -- -- -- --

Tax On Extraordinary Items -- -- -- -- --

Net Extra Ordinary Income/Expenses -- -- -- -- --

Interest 1.01 1.23 2.70 4.88 8.93

PBDT 3.10 5.83 14.26 13.99 15.23

Depreciation 1.29 1.22 2.25 3.23 4.58

Depreciation On Revaluation Of Assets -- -- -- -- --

PBT 1.81 4.61 12.01 10.76 10.65

Tax 0.53 1.61 4.41 1.43 1.20

Net Profit 1.28 3.00 7.60 9.33 9.45

Prior Years Income/Expenses 0.29 -0.05 -- -- --

Depreciation for Previous Years Written

Back/ Provided-- -- -- -- --

Dividend -- -- 2.00 0.50-- --

Dividend Tax -- -- -- -- --

Dividend (%) -- -- 2% 5% --

Earnings Per Share 2.71 6.37 16.14 3.84 3.89

Book Value -- -- -- 48 51.2

Equity 4.71 4.71 4.71 24.31 24.31

Reserves -- 15.27 21.93 121.99 125--

Face Value 10.00 10.00 10.00 10.00 10.00


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SUMMASUMMASUMMASUMMARYRYRYRY::::----

Our research says that the reasonOur research says that the reasonOur research says that the reasonOur research says that the reason for the down move seen in the stockfor the down move seen in the stockfor the down move seen in the stockfor the down move seen in the stock

is the lackluster Opm and the selling pressure by Banks and other Ipois the lackluster Opm and the selling pressure by Banks and other Ipois the lackluster Opm and the selling pressure by Banks and other Ipois the lackluster Opm and the selling pressure by Banks and other Ipo

investorsinvestorsinvestorsinvestors

Use the current dip in the stock to ACCUMULATE the stock and UseUse the current dip in the stock to ACCUMULATE the stock and UseUse the current dip in the stock to ACCUMULATE the stock and UseUse the current dip in the stock to ACCUMULATE the stock and Use

rally above 36 to make your investments Free in the company. Timerally above 36 to make your investments Free in the company. Timerally above 36 to make your investments Free in the company. Timerally above 36 to make your investments Free in the company. Time

frame fframe fframe fframe for investment should be minimum 18 months on the stock.or investment should be minimum 18 months on the stock.or investment should be minimum 18 months on the stock.or investment should be minimum 18 months on the stock.

Research note prepared byResearch note prepared byResearch note prepared byResearch note prepared by

Vinayak,Vinayak,Vinayak,Vinayak,Varun Jain.Varun Jain.Varun Jain.Varun Jain.

http://www.teamsr.co.cc/http://www.teamsr.co.cc/http://www.teamsr.co.cc/http://www.teamsr.co.cc/

MANDATORY DISCLOSURES:MANDATORY DISCLOSURES:MANDATORY DISCLOSURES:MANDATORY DISCLOSURES:

This document is for information only and is meant forThis document is for information only and is meant forThis document is for information only and is meant forThis document is for information only and is meant for the use of thethe use of thethe use of thethe use of the

recipient & not for circulation. The information contained inrecipient & not for circulation. The information contained inrecipient & not for circulation. The information contained inrecipient & not for circulation. The information contained in

this document has been taken from publicly available information,this document has been taken from publicly available information,this document has been taken from publicly available information,this document has been taken from publicly available information,

trade and statistical services & other sources. While thetrade and statistical services & other sources. While thetrade and statistical services & other sources. While thetrade and statistical services & other sources. While the

information contained herein is from sources believedinformation contained herein is from sources believedinformation contained herein is from sources believedinformation contained herein is from sources believed to be reliable,to be reliable,to be reliable,to be reliable,

we do not hold ourselves responsible for its Completeness andwe do not hold ourselves responsible for its Completeness andwe do not hold ourselves responsible for its Completeness andwe do not hold ourselves responsible for its Completeness and

accuracy. All opinions and estimates included in this reportaccuracy. All opinions and estimates included in this reportaccuracy. All opinions and estimates included in this reportaccuracy. All opinions and estimates included in this report

constitute our judgment as of this date and are Subject to changeconstitute our judgment as of this date and are Subject to changeconstitute our judgment as of this date and are Subject to changeconstitute our judgment as of this date and are Subject to change

without notice. Investors are expected to use the iwithout notice. Investors are expected to use the iwithout notice. Investors are expected to use the iwithout notice. Investors are expected to use the informationnformationnformationnformation

contained in this report at their own risk. This report is not and shouldcontained in this report at their own risk. This report is not and shouldcontained in this report at their own risk. This report is not and shouldcontained in this report at their own risk. This report is not and should

not be construed as an offer or thenot be construed as an offer or thenot be construed as an offer or thenot be construed as an offer or the

Solicitation of an offer to buy or sell any securities. TEAMSolicitation of an offer to buy or sell any securities. TEAMSolicitation of an offer to buy or sell any securities. TEAMSolicitation of an offer to buy or sell any securities. TEAM

STOCKRESEARCHERS and its affiliates may act as market makerSTOCKRESEARCHERS and its affiliates may act as market makerSTOCKRESEARCHERS and its affiliates may act as market makerSTOCKRESEARCHERS and its affiliates may act as market maker

or have assumeor have assumeor have assumeor have assumed an underwriting position in the securities ofd an underwriting position in the securities ofd an underwriting position in the securities ofd an underwriting position in the securities of

companies discussed herein and may sell them to or buy them fromcompanies discussed herein and may sell them to or buy them fromcompanies discussed herein and may sell them to or buy them fromcompanies discussed herein and may sell them to or buy them from

customers on a principal basis.customers on a principal basis.customers on a principal basis.customers on a principal basis.

THE STOCK IS HELD IN THE LONG TERM PORTFOLIOS OF THETHE STOCK IS HELD IN THE LONG TERM PORTFOLIOS OF THETHE STOCK IS HELD IN THE LONG TERM PORTFOLIOS OF THETHE STOCK IS HELD IN THE LONG TERM PORTFOLIOS OF THE

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Rathi Steel and Power Ltd. REPORT DATED 7th JUNE 2008