Ankit Metal & Power Ltd BSE Scrip Code:

Transcription

1 Ankit Metal & Power Ltd BSE Scrip Code: Steel- Sponge Iron September 17, 2012 Business Summary Ankit Metal & Power Limited (AMPL), a Kolkata-based company, promoted by Mr Suresh Kumar Patni, is engaged in manufacturing of sponge iron, ingots, billets, TMT bars and ferro alloys at Bankura in West Bengal. Besides manufacturing, the company is also actively involved in trading of steel items and other products like ferro alloys which accounted for about 28% of net sales in FY12. AMPL was initially under the aegis of Impex Group which is a decadeold business house with established presence mainly in West Bengal. The Impex Group was set up by Mr Vimal Kumar Patni (eldest of the six Patni brothers and elder brother of Mr Suresh Kumar Patni). While some of the companies of the group were under the control of Mr Suresh Kumar Patni, others were controlled either by Mr Vimal Kumar Patni or other brothers. Now the Suresh Kumar Patni faction has formed a new group called SKP Group, comprising companies like Rohit Ferro Tech Limited, Impex Metal & Ferro Alloys, Impex Ferro Tech Limited. AMPL is currently trading at 2 times FY12 EPS and 0.4 times adjusted book value. Board of directors Person Role Suresh Kr. Patni NED, Chairman Ankit Patni MD Sanjay Kr. Singh WTD Kailash Chand Jain NED, Independent Vijay Chand Jain NED, Independent Jatin Nath Rudra NED, Independent Source: AR and CARE Research Note: MD: Managing Director, WTD: Whole-time Director ED: Executive Director, NED: Non Executive Director 1 Initiative of the BSE Investors Protection Fund

2 Background The company was incorporated on August 7, 2002 as Ankit Steel Works Private Limited and was subsequently renamed as Ankit Metal & Power Private Limited on July 8, Mr. Suresh Kumar Patni has promoted the company. Pursuant to change in the corporate status of the company from private to public, the name of the company was further changed to Ankit Metal & Power Limited with effect from August 31, Mr. S.K. Patni, aged about 51 years, is a graduate having wide experience of more than two decades in iron and steel related industry. He is well supported by his son, Mr. Ankit Patni (MD). Mr. Ankit Patni has been Director with the company since Although the promoters have rich business experience, AMPL has had a short track record having commenced operation only in the year However, in short span of time, it has established its presence in the Eastern India market. Business overview AMPL has an integrated steel manufacturing facility, having presence across the value chain encompassing sponge iron, billets, ferro alloys and value-added end-products like TMT bars. This apart, the company is also setting up a pellet plant which will act as a backward integration for the company. Furthermore, the company is also having power plants to cater to its entire captive requirement. AMPL derived 28% of net sales in FY12 from trading activities. Strengths and growth drivers AMPL s core strength lies in manufacturing of sponge iron, billets, ferro alloys and TMT bars. It has had a steady growth in revenue over the years, and net sales in FY12, witnessed a robust y-o-y increase of about 35% mainly on the back of improvement in realisation of all products coupled with increased sales quantity of sponge iron. Capacity expansion in sponge iron and new capacities of pellets and wire rod would further lead to growth in sales volumes. Risk and concerns Due to low entry barrier, AMPL is facing stiff competition from the unorganised sector. AMPL does not have captive mines for basic raw materials like coal and iron ore and has to procure the same from open market including through e-auction conducted by Coal India Ltd. The company has also entered into an agreement with Eastern Coalfields Limited for its coal requirement (annual contracted supply of 0.18 million tonnes); however, price remains unfixed. Thus, the company is not insulated from price volatility of input prices. Future strategy and expansion plans The company is setting up a 0.6 mtpa Iron Ore Pellet plant, 30 TPD DRI Kiln, RM Pre-heater, 15 MT AOD Converter, Railway siding and 80,000 TPA Wire rod mill at its existing site. The project is expected to be completely operational from March The latent demand for steel items in the market and AMPL s mission to become an integrated steel player of substantial size in the domestic steel industry prompted it to undertake the aforesaid project. Industry outlook The iron & steel industry is highly cyclical in nature and its fortune is dependent on demand from automobile and infrastructure sectors. The demand outlook for the domestic steel industry remains subdued owing to slowdown in the economic activities in infrastructure and auto sector, the primary consumers of steel in India. The industry today is also facing unanticipated problem of iron ore scarcity due to mining ban in Karnataka region, investigation by Shah Commission and non-issuance of D-form in Orissa. This has not only affected the availability of iron ore, but also led to spiralling prices. The economic slowdown is also expected to impede asset growth in sectors like infrastructure, automobile, real estate and, thus, cause moderation in demand of steel in the immediate term. Increasing costs of iron ore and coal and slower demand is expected to cumulatively affect the earnings potential and profitability margins of steel & steel-related companies. 2 Initiative of the BSE Investors Protection Fund

3 Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) AMPL MSP Steel Tata Sponge Gallantt Ispat Total income Net sales EBITDA Ordinary PAT Adjusted PAT Per share data (Rs.) Adjusted BVPS Diluted EPS* Growth (Y-o-Y) (%) Growth in Total income (6.3) 20.3 Growth in Net sales (6.2) 17.9 Growth in EBITDA (83.0) NM Growth in Adjusted PAT 37.1 (47.4) (25.3) 86.1 Growth in EPS* (52.7) (49.0) (25.3) 86.4 Profitability ratio (%) EBITDA margin Adjusted PAT margin Valuation ratios (Times) Price/EPS (P/E) Price/Book value (P/BV) Enterprise value (EV)/EBITDA Note: MSP Steel: MSP Steel & Power Ltd., Tata Sponge: Tata Sponge Iron Ltd., Gallantt Ispat: Gallantt Ispat Ltd. Quarterly financials Quarter ended June 30, 2012 Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income Net sales EBITDA Ordinary PAT Adjusted PAT Growth (Q-o-Q) (%) Growth in net sales Profitability ratio (%) EBITDA margin Adjusted PAT margin Initiative of the BSE Investors Protection Fund

4 Financial analysis Net sales in FY12 witnessed a robust y-o-y increase of about 35%. EBIDTA and PAT margins also increased, although marginally. FY12, raw materials cost as a percentage of net sales was at around 80%. The company reported EBITDA margins and adjusted PAT margins of 9.5% and 3.6%, respectively in FY12. The total debt as on March 31, 2012 was at Rs crore compared to an adjusted networth of Rs.448 crore. AMPL s financial position is satisfactory with the overall gearing at 1.34 times as on March 31, The long-term debt-equity ratio is also comfortable at 0.85 as on March 31, Operating cash flows for the company has been positive in each of the last four years (i.e. period considered for analysis). Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income Net sales EBITDA Depreciation and amortisation EBIT Interest PBT Ordinary PAT Adjusted PAT Balance sheet (Rs. crore) Adjusted networth Total debt Cash and bank Investments Net fixed assets (incl. CWIP) Net current assets (excl. cash, cash equivalents) Per share data (Rs.) Adjusted BVPS Diluted EPS DPS Growth (Y-o-Y) (%) Growth in total income Growth in net sales Growth in EBITDA (44.5) Growth in adjusted PAT (71.8) Growth in EPS (71.4) (52.7) Key financial ratio EBITDA margin (%) Adjusted PAT margin (%) RoCE (%) RoE (%) Gross debt - equity (times) Net debt - equity (times) Interest coverage (times) Current ratio (times) Inventory days Receivable days Note: Financial Year (FY) refers to period from April, 1 to March, 31 NM: Non Meaningful 4 Initiative of the BSE Investors Protection Fund

5 DISCLOSURES Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. This report has been sponsored by the BSE Investors Protection Fund. DISCLAIMER CARE Research, a division of Credit Analysis & REsearch Limited [CARE] has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain or from sources considered reliable. However, neither the accuracy nor completeness of information contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. The subscriber / user assumes the entire risk of any use made of this report or data herein. CARE specifically states that it or any of its divisions or employees do not have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied for any purpose. PUBLISHED BY CARE Research is an independent research division of CARE Ratings, a full-service rating company. CARE Research is involved in preparing detailed industry research reports with 5-year demand and 2-year profitability outlook on the industry besides providing comprehensive trend analysis and the current state of the industry. CARE Research also offers research that is customized to client requirements. Credit Analysis & REsearch Ltd. (CARE) is a full service rating company that offers a wide range of rating and grading services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best international practices. Head Office: 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai Tel: Fax: Regional Offices: New Delhi Kolkata Ahmedabad Bangalore Hyderabad Chennai Pune Published on behalf of The Stock Exchange Investors' Protection Fund First Floor, P J Towers, Dalal Street, Mumbai. Tel: /34