Usha Martin is a company engaged in value added wires and wire rope business. It sold off its steel business to Tata Steel in 2019. Proceeds of nearly 4200 crores were used to cut down debt and currently debt has substantially reduced from above 4000 crores to around 500 crores. What the selling of the steel business has done is to reduce the volatility of earnings. Now the company can be considered as a converter of steel. This could be a business with steady cash flows and high return ratios. Past two quarter results show the steadiness of the business with sales in excess of 600 crores and net profit in excess of 55-60 crores. Market cap is 2800 crores.
Coming to the chart of Usha Martin, it broke out of a 10 year high above 48 and went up quickly to a recent swing high of 96, and then has been consolidating in a broad range of 85-93, in the process forming a flag like pattern. What is more interesting is that all during the small and midcap carnage in last few days and weeks, it has not corrected more than 38.2% of its latest leg of rally from 65 to 95 (fibonacci levels shown in light green dotted lines on chart). This usually indicates strength of trend. It has formed a flag like pattern with flag pole from 65 to 95 and breakout point around 93. If it breaks out with volumes above recent swing high of 96, it can target 125. On the higher side, it has major peaks in the past at 96, 107 and 155.
disc: invested and have added more in the recent consolidation.
