Foseco india limited

Stock Opportunities
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I have just started studying this company and it seems interesting to me. I am posting a brief write up specifically to invite comments as to pros and cons in investing in this one.

FOSECO INDIA LIMITED

CMP ABOUT 420 CURRENT MARKET CAP AROUND 270 CRORES

Foseco is Indiaâs leading supplier of metallurgical chemicals for ferrous and non ferrous foundry industries. Its parent Foseco Plc is acknowledged as a world leader in the field.

Foseco manufactures more than 150 products for steel and foundry industry which are used as additives and consumables in the form of granulated flux, alloy additions, and granulated fluxes which improve the physical properties and surface qualities of castings. These help to reduce the cost of melting, moulding and casting for various ferrous and non ferrous metals.

COMPETITIVE ADVANTAGE:

Foseco is acknowledged as the foremost company in India which has the ability to deliver the widest range of solutions for producing castings of the highest standards in terms of quality, integrity, surface finish and other parameters. It caters to majority of Indian biggies in the industry including Tata Steel, Sail, Bharat Forge, LMW, Kalyani group, Mukand group etc. In terms of providing technology and solutions, the company is far ahead of its competitors and hence has a sort of moat in terms of competitive advantage.

FINANCIALS

EQUITY is 6.39 crores with face value of Rs 10. Year ending is December every year. Promoter holding is 75%.

Debt is around 11 crores since last 5-6 years. As on dec 09 cash balance was around 28 crores.

Last six quarter results show very good growth quarter on quarter mirroring the growth in Indian manufacturing sector.

Quarter

Jun 09

Sep 09

Dec 09

Mar 10

Jun 10

Sep 10

Sales

28

33.9

37

39.32

41.82

50.49

NP

3.03

3.95

2.96

4.07

4.7

5.18

EPS(qtrly)

4.74

6.18

4.63

6.37

7.36

8.12

LAST SIX YEARS RESULTS

Year

Dec 04

Dec 05

Dec06

Dec07

Dec 08

Dec 09

9msep10

Sales

118

132

147

174

167

133

131

NP

16.7

13.8

16.3

20

15.6

12.5

13.95

After the blips of 08-09, the company seems to be getting on track with its growth trajectory.

Based on Dec 10 earnings estimates of around 29-30, the stock is currently quoting at around 14 PE and till date the company has paid dividend amounting to Rs 10 per share in the current financial year which makes the dividend yield in excess of 2 % even if we expect no further dividend during last quarter.

With India likely to be a hub of manufacturing for a host of industries for which ferrous and non ferrous metal demand is likely to be high, Foseco with its competitive advantage, good dividend payout, and reliable management could be considered as a good long term investment with steady growth and good dividend.

Disc: No holding as of now.

1 Like
2

Which are the raw materials consumed… what will be the impact of crude prices on profitability ?

Rgds.

Mahesh

3

I dont know too much about the raw material consumed bcos it is difficult to lay hands on its AR.

4

This looks like a good company with a definitive competitive advantage if one goes by the excellent ROCE that it generates year after year. However Valuations appear fair to me, one can put it into watch list to add on significant correction. I think i have heard about this in the equity desk forum & apparently the company is very shareholder friendly & if you mail them they will send out the AR.

5

Hi,

Their websitehttp://www.foseco.co.in doesn’t carry any sort of information about the company and its operations.

Regards,

G

6

Hi hitesh,

The AR is available at

http://www.bseindia.com/bseplus/AnnualReport/500150/5001500310.pdf Link: http://www.bseindia.com/bseplus/AnnualReport/500150/5001500310.pdf

Regards.

Rajat

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CM recommended it int recent issue.

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Key highlights of AGM by Capital Mkt;

Automobile industry did reasonably well in Dec’14 quarter and that help the overall improvement in the sales and margins. However there is no clear trend going forward.Rest of the industries be it engineering, general engineering, construction, infrastructure, ferrous and non-ferrous industries, minerals and mining, glass, special chemicals etc. are operating at lower capacities and that is hurting the overall sales growth and margins.

However tight cost control measures has lead to better margins. Management expects margins can improve if economic activity of the country improves and utilization rates get better.No capex is planned by the company. As per the management, they are ready and if the economy improves, then will go for some capex.

There are no plans for higher exports and Parent doesn’t see the subsidiary as a hub for export markets. Whatever exports happens are to group companies and in Asian geography.Overall, management expects CY 2015 to be better than CY 2014.

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I request senior boarders to have a look at this company. In view of the increased dividends and results in the midst of a slowdown, the company has the potential to do extremely well when the economy turns.

Also, as a MNC , comfort of corporate governance, etc. is an added positive.

10

these are the type of companies with very high operating efficiency but poor growth. there are such companies which give out good dividends but no growth. But without growth how much can the dividend actually increase. And most of this increase is eaten up by inflation.So Its growth vrs dividend.the call is your. …personally i would go for growth

11

I was invested in this co. for 7 odd years. As has been mentioned, the dividends were great but over 7 years the price did not compound as expected. I think the reason is very poor liquidity in the script. When I tried to sell my holding of just 1000 shares _@ market prices _it took me 3 days to exit. emphasized text

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From Capital Markets

CY 2016 will be another good year
The company held its AGM on 27th April 2016 and was addressed by Chairman Mr. Pradeep Mallick

Key highlights

  • As per the management, automobile industry did well in CY 2015 which compensated to a large extent the slowdown in other industries. The growth in M&H CV segment was much awaited. The company was able to get good volumes and margins in this segment.

  • Innovation, new products and new ways and mechanisms of doing business is helping the company. More business came to the company from same customers.

  • There was not much competitive pressure and unorganized sector continues to lose market share.

  • The company expects some traction to be seen in Railways, mining, ferrous and non ferrous industries, construction, and engineering and special chemicals business in CY 2016.

  • Management expects CY 2016 to be another good year like CY 2015 wherein sectors and customers are showing lot of positive traction than CY 2015.

  • Management expects the utilization ratio to improve continuously. Currently the company is operating at around 75% of the overall capacity, and it can increase further without any capex being required.

  • No capex is planned by the company. As per the management, they are ready and if the economy improves beyond the expectation, then will go for some capex.

  • There are no plans for higher exports and Parent doesn’t see the subsidiary as a hub for export markets. Whatever exports happens are to group companies and in Asian geography.

1 Like
13

Anyone holding htis stock?

There is an annoucement for delisting of the company the announcement says delist from bse does it mean it will be delisting from nse also? https://nseindia.com/corporate/FOSECOIND_15012019140304_Reg29_BMIntimationtoSEsJan2019_090.pdf
Thanks a lot for your help.

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