BUY CMP 16.50 Target Price 18.00 ANKIT METAL & POWER LIMITED Result Update: Q3 FY13 MAR 8 th, 2013 ISIN: INE106I01010 Stock Data Sector Iron & Steel BSE Code 532870 Face Value 10.00 52wk. High / Low (Rs.) 30.60/11.05 Volume (2wk. Avg ) 84000 Market Cap ( Rs in mn ) 1573.70 Annual Estimated Results (A*: Actual / E*: Estimated) Years FY12A FY13E FY14E Net Sales 9257.83 11738.40 14086.08 EBITDA 892.71 1797.53 2168.32 Net Profit 332.40 568.22 663.13 EPS 3.49 5.96 6.95 P/E 4.73 2.77 2.37 Shareholding Pattern (%) 1 Year Comparative Graph SYNOPSIS Ankit Metal & Power Limited is the part of the Rs. 38000 millions SKP Group, engaged in producing Rolled products comprising of Sponge Iron, Steel Melting Shop, Billets and Rolling Mill. The company s net sales registered an 19.90% increase and stood at a record Rs. 2995.43 million from Rs. 2498.35 million over the corresponding quarter last year. The company s net profit registered a 125.10% increase and stood at a record Rs. 127.72 million from Rs. 56.74 million over the corresponding quarter last year. AMPL is in the process of establishing a 600000 TPA pelletisation facility that will utilize iron ore fines & optimize raw material costs for DRI operations & ultimately TMT bars production. AMPL is enhancing the capacity of its wire rod mill from 100000 TPA to 180000 TPA & modifying the wire rod mill from MS to SS. BSE SENSEX ANKIT METAL & POWER LTD Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 40% over 2011 to 2014E respectively. Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Ankit Metal & Power Ltd 16.50 1573.70 3.49 4.73 0.35 0.00 SAIL Ltd 69.70 287897.60 7.99 8.72 0.72 20.00 Sesa Goa Ltd 167.50 145270.30 10.86 15.39 1.12 400.00 Kirloskar Ferro Industries Ltd 25.70 3529.30 3.25 7.91 0.93 20.00
Investment Highlights Results updates- Q3 FY13, Ankit Metal & Power Limited is the part of the Rs. 38000 millions SKP Group, engaged in producing Rolled products comprising of Sponge Iron, Steel Melting Shop, Billets and Rolling Mill, reported its financial results for the quarter ended 31DEC, 2012. Months DEC-12 DEC-11 % Change Net Sales 2995.43 2498.35 19.90% PAT 127.72 56.74 125.10% EPS 1.34 0.59 125.10% EBITDA 395.89 180.75 119.03% The company s net profit jumps to Rs.127.72 million against Rs.56.74 million in the corresponding quarter ending of previous year, an increase of 125.10%. Revenue for the quarter rose 19.90% to Rs.2995.43 million from Rs.2498.35 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.34 a share during the quarter, registering 125.10% decrease over previous year period. Profit before interest, depreciation and tax is Rs.395.89 millions as against Rs.180.75 millions in the corresponding period of the previous year. Expenditure : Break up of Expenditure Rs. in Millions Q3 FY13 Q3 FY12 Depreciation 103.60 32.47 Employees Benefit Expenses 22.11 16.62 Other Expenditure 107.29 59.54 Purchases of Stock in Trade 695.45 586.47 Cost of Materials Consumed 1927.56 1487.38 Power Expense 69.83 76.88
Latest Updates Ankit Metal & Power Limited established a 59400 TPA induction furnace with a billet casting plant taking its capacity to 181290 TPA. Ankit Metal & Power Limited s 100000 TPA rolling mills produce high quality TMT bars, which is sold under the Ankit brand during the year 2011-12. Ankit Metal & Power Limited is in the process of establishing a 600000 TPA pelletisation facility that will utilize iron ore fines & optimize raw material costs for DRI operations & ultimately TMT bars production. Ankit Metal & Power Limited is also enhancing the capacity of its wire rod mill from 100000 TPA to 180000 TPA & modifying the wire rod mill from MS to SS. Ankit Metal & Power limited is also establishing a railway siding, AOD convertor and RM pre-heater. Company Profile Ankit Metal & Power Limited is the part of the Rs. 38000 millions SKP Group, was floated in 2005 as an Integrated Steel Plant to produce 100,000 mtpa of Rolled products comprising of Sponge Iron, Steel Melting Shop, Billets and Rolling Mill along with 12.5 MW Captive Power Plant. The Company s ANKIT-TMT BARS are well accepted in the state. The company is headquartered in Kolkata; manufacturing facility located in Jorehira, Bankura district of West Bengal. The SKP Group is promoted by well-known figure in Ferro Alloys and Steel Industry, Mr. S. K. Patni. The group is successful in all the diverse aspects of business Manufacturing, Trading, and Import & Export. It is one of the largest merchant producers of High Carbon Ferro Chrome, Silico Manganese, Ferro Manganese & Ferro Silicon in India and exports 70% of Ferro Alloys manufactured to countries all over the globe. The group is also setting up an integrated steel plant under the name Ankit Metal & Power Limited. Group companies: ROHIT FERRO - TECH LIMITED Impex Ferro Tech Ltd. Impex Metal & Ferro Alloys Ltd. SKP Overseas Pte Ltd.
Products Sponge Iron M.S. Billets TMT Bars Power Pig Iron Ferro Silicon Ankit TMT is produced under stringent quality control and is best for use under most severe conditions and major constructions like bridges, flyovers, high-rise buildings and even in areas of high humidity, cyclone prone areas, seismic prone areas, etc. due to its high corrosion and seismic resistant and high strength properties. The Company will be producing wire rods & other rolled products also. Typical end-users of these products are real estate developers, construction units, forging units, wire drawing units, railways and engineering industries. Quality AMPL is committed to quality and believes that it is the cornerstone for sustained business links. In fact, the company has excellent business relations with the existing customers and has been consistently receiving repeat orders from them. The Company s products are well accepted in the Indian as well as international market for its quality & consistency within the specified parameters. To further pursue its quality goals, the company got the ISO: 9001 Certification for its plant, and ISI gradation for it s products.
Financial Highlight Balance sheet as at March 31, 2012 (A*- Actual, E* -Estimations & Rs. In Millions) FY12 FY13E FY14E EQUITY AND LIABILITIES: Shareholders Funds: Share Capital 953.76 953.76 953.76 Reserves and Surplus 3525.94 4094.16 4757.30 Net worth (a) 4479.7 5047.92 5711.06 Non-Current Liabilities: Long-term borrowings 3675.94 5844.74 7802.73 Deferred Tax Liabilities [Net] 175.56 233.49 289.53 Other Long Term Liabilities 288.14 388.99 494.02 Long Term Provisions 0.24 0.26 0.29 Long term liabilities (b) 4139.88 6467.49 8586.57 Current Liabilities: Short-term borrowings 2080.55 2663.10 3169.09 Trade Payables 1668.62 2269.32 2882.04 Other Current Liabilities 508.49 686.46 871.81 Short Term Provisions 71.1 117.32 164.24 Current Liabilities 4328.76 5736.20 7087.18 Total (a+b+c) 12948.34 17251.62 21384.80 ASSETS: Non-Current Assets: Fixed Assets: Tangible Assets 4688.17 6920.34 8926.52 Capital work-in-progress 2420.76 3171.20 3900.57 Intangible Asset under Development 2.49 4.08 6.49 (d) 7111.42 10095.62 12833.58 other non-current assets 0.13 0.13 0.13 Non Current Investments 1.18 2.01 3.31 Long Term Loans and Advances 309.6 318.89 331.64 (e) 310.91 321.02 335.08 Current Assets: Inventories 2099.21 2519.05 2947.29 Trade Receivables 1780.85 2315.11 2847.58 Cash and Bank Balances 235.38 298.93 360.21 Short Term Loans and Advances 1243.57 1548.24 1904.34 Other Current Assets 167 153.64 156.71 (f) 5526.01 6834.97 8216.14 Total (d+e+f) 12948.34 17251.62 21384.80
Annual Profit & Loss Statement for the period of 2011 to 2014E Value(Rs.in.mn) FY11 FY12 FY13E FY14E Description 12m 12m 12m 12m Net Sales 6886.84 9257.83 11738.40 14086.08 Other Income 6.69 13.10 11.95 13.15 Total Income 6893.53 9270.93 11750.36 14099.23 Expenditure -6308.77-8378.22-9952.82-11930.91 Operating Profit 584.76 892.71 1797.53 2168.32 Interest -180.07-350.99-710.45-909.37 Gross profit 404.69 541.72 1087.08 1258.94 Depreciation -124.34-142.34-416.34-478.79 Profit Before Tax 280.35 399.38 670.75 780.16 Tax -37.85-66.98-102.52-117.02 Net Profit 242.50 332.40 568.22 663.13 Equity capital 328.76 953.76 953.76 953.76 Reserves 1320.21 3525.94 4094.16 4757.30 Face value 10.00 10.00 10.00 10.00 EPS 7.38 3.49 5.96 6.95 Quarterly Profit & Loss Statement for the period of 30 June, 2012 to 31 Mar, 2013E Value(Rs.in.mn) 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13E Description 3m 3m 3m 3m Net sales 2795.00 2862.68 2995.43 3085.29 Other income 1.07 3.80 3.31 3.77 Total Income 2796.07 2866.48 2998.74 3089.07 Expenditure -2367.36-2421.82-2602.85-2560.79 Operating profit 428.71 444.66 395.89 528.27 Interest -172.94-198.17-161.59-177.75 Gross profit 255.77 246.49 234.30 350.52 Depreciation -102.87-103.14-103.61-106.72 Profit Before Tax 152.90 143.35 130.69 243.81 Tax -24.16-14.44-2.97-60.95 Net Profit 128.74 128.91 127.72 182.85 Equity capital 953.76 953.76 953.76 953.76 Face value 10.00 10.00 10.00 10.00 EPS 1.35 1.35 1.34 1.92
Ratio Analysis Particulars FY11 FY12 FY13E FY14E EPS (Rs.) 7.38 3.49 5.96 6.95 EBITDA Margin (%) 8.49% 9.64% 15.31% 15.39% PBT Margin (%) 4.07% 4.31% 5.71% 5.54% PAT Margin (%) 3.52% 3.59% 4.84% 4.71% P/E Ratio (x) 2.24 4.73 2.77 2.37 ROE (%) 14.71% 7.42% 11.26% 11.61% ROCE (%) 14.25% 10.11% 19.96% 21.95% Debt Equity Ratio 2.02 1.29 1.20 1.11 EV/EBITDA (x) 0.93 1.76 0.88 0.73 Book Value (Rs.) 50.16 46.97 52.93 59.88 P/BV 0.33 0.35 0.31 0.28 Charts
Outlook and Conclusion At the current market price of Rs.16.50, the stock P/E ratio is at 2.77 x FY13E and 2.37 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.96 and Rs.6.95 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 40% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 0.88 x for FY13E and 0.73 x for FY14E. Price to Book Value of the stock is expected to be at 0.31 x and 0.28 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.18.00 for Medium to Long term investment. Industry Overview India has acquired a central position on the global steel map, on back of ever increasing demand from sectors like infrastructure, real estate and automobiles, at home and abroad. India was ranked the world's fourth largest crude steel capacity in 2011-12 and is expected to become the second largest producer of crude steel in the world by 2015-16. India is also the world's largest producer of sponge iron with a host of coal based units located in its mineral-rich states. "With modernisation programmes of various public and private companies, the country will soon rise to second place," as per Dr. Manmohan Singh, the Prime Minister of India. India's steel making capacity is estimated to exceed 100 million tonnes (MT) by 2013 and the production is expected to reach 275 MT by 2020. The per capita steel consumption increased from 34 kilograms (kg) in 2004-05 to 59 kg in 2011-12. Market Size The World Steel Association has estimated steel consumption in India to grow at five per cent in 2013. "Steel producers may see a spurt in demand in the medium term if the Indian Government implements its US$ 1 trillion infrastructure investment plan," as per India Ratings. India's steel-making capacity is slated to cross 100 MT in 2013 that will require about 160-170 MT of iron ore.
The steel industry is expected to add 12.8 MT of capacity in the second half of 2012-13, with the major contributors identified as SAIL (3.4 MT), RINL (2.3 MT), Bhushan Steel (2.1 MT) and Jindal Steel (2 MT). Indian crude steel production is estimated to grow at a compound annual growth rate (CAGR) of around 10 per cent during 2010-2013, whereas the finished steel consumption is estimated to grow at a CAGR of around 12 per cent during FY 2012-14, as per a RNCOS research report titled, 'Indian Steel Industry Outlook to 2012'. In addition, the Indian Bureau of Mines estimates the current pelletisation capacity in India to be around 20 million tonnes per annum (MTPA). Steel Authority of India Ltd (SAIL) has recorded a growth of 8 per cent during November 2012 compared to the same month last year. The public sector company produced 972,000 tonnes of saleable steel during November 2012 Bhilai Steel Plant has registered growth of 4.1 per cent, 5.3 per cent and 5.3 per cent in hot metal, crude steel and saleable steel production respectively during April-December 2012, as compared to the same period last year Investments SAIL plans to invest US$ 8 billion in Chhattisgarh. SAIL also plans to enhance the capacity of its Bhilai steel plant from 4 MTPA to 10 MTPA JSW Steel and Japan-based JFE Steel Corporation have signed a joint agreement. JFE will provide technology for the production of non-oriented electrical steel sheets at the JSW Steel's Vijayanagar plant in Karnataka The sinter plant at the upcoming IISCO Steel Plant (ISP) of SAIL commenced production. The Rs 704 crore (US$ 128.94 million) project is part of the 2.5 MTPA integrated steel plant under construction at Burnpur near Asansol in West Bengal Mittal Corp is setting up a 1.5 MTPA pellet and beneficiation plant in Karnataka, while JSPL is in the process of setting up a 4 MTPA pellet plant in Orissa Essar Projects has set up an 8 MTPA pellet plant in Vizag and 6 MTPA plant in Paradip for Essar Steel Government Initiatives The Union Budget 2012-13 is a pragmatic and growth-oriented one. Infrastructure sector has been given due thrust in the budget. Doubling the infrastructure tax-free bond amount to Rs 60,000 crore (US$ 10.99 billion), reaffirming investment of Rs 50,000 billion (US$ 9.16 billion) in infrastructure sector in the 12th Five Year Plan (2012-17) are the steps that present a scenario conducive for growth of steel industry, according to Mr C S Verma, Chairman, SAIL.
The main highlight of the Union Budget 2012-13 for the steel industry was the proposal to reduce basic customs duty on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron-ore beneficiation plants from 7.5 per cent to 2.5 per cent. The other proposals relating to the steel sector are as under: To reduce basic customs duty on -Coating material for manufacturing of electrical steel from 7.5 per cent to 5 per cent - Nickel ore and concentrate and nickel oxide/ hydroxide from 2.5 per cent or 7.5 per cent to Nil To enhance export duty on chromium ore from Rs 3,000 (US$ 54.95) per tonne to 30 per cent ad valorem To enhance basic customs duty on non-alloy, flat-rolled steel from 5 per cent to 7.5 per cent Some other initiatives taken by the Government include the following: 100 per cent foreign direct investment (FDI) through the automatic route is allowed in the sector Large infrastructure projects in Public-Private Partnership (PPP) mode are being formed The Government is encouraging research and development (R&D) activities in the steel sector Reduced custom duty and other favorable measures The Government of India has framed the National Steel Policy (NSP) to encourage the steel industry to reach global benchmarks in terms of quality, cost and efficiency Road Ahead Indian steel production has grown strongly in the recent decades and is likely to continue to expand as domestic producers increase their capacity to meet anticipated demand. The biggest opportunity before steel industry in India is that there is enormous scope for increasing consumption of steel in almost all sectors, including the rural sector which remains fairly unexposed to the multi-faceted use of steel. Steel makers such as SAIL and Jindal Steel are stepping up investments in beneficiation and pelletisation capacities. The Finnish firm Metso has signed up contracts with JSW Steel, JSPL, Essar and Bhushan Steel over the past one year to supply a host of equipments. A roadmap for research and development for steel industry has also been finalised and will be adopted with a special focus on beneficiation, coal ash reduction and promotion of production of high-grade value added steel in the country. Similarly, majority of Indian steel industry, in private sector, has also shown keenness to adopt latest technologies to make existing steel manufacturing processes more efficient and productive, as per Mr Beni Prasad Verma, Union Minister of Steel, the Government of India.
Even though, steel companies from across the world have shown interest in the Indian steel industry due to its phenomenal performance. India is likely to remain self- sufficient in its supply of iron ore for the foreseeable future. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.
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