Steelcast Limited is one of India's leading steel
castings manufacturing company in the earthmoving equipment sector. Strong
demand from user industries in India and globally has put the company on a high
growth trajectory. Listed on the Bombay Stock Exchange (BSE), Steelcast Ltd.
posted revenues of over Rs. 238 crore in 2011-12, with nearly 45% coming from
exports, mainly to the USA and Germany.
Company's product
range is castings in carbon steel and low alloy steel. Some of the company's
major clients are Caterpillar, Komatsu, Thyssen Krupp, JCB, Tatas, L&T,
Essar & BEML.
Steelcast's
manufacturing capacity is 22,000 tonnes per annum and further expansion is
planned in the coming few years. Company caters to the following industries:
earthmoving equipment manufacturers, mining, mineral processing equipment
manufacturers.
Steelcast's
state-of-the-art manufacturing facilities as well as registered office are
located in Bhavnagar, Gujarat. Established as a partnership firm in 1960, the
company got converted into a private limited company in 1972. Thereafter, in
1994, it came out with its public issue with equity participation from Kurimoto
Ltd. of Japan. The Japanese company continues to have a 2.5% stake in the
company to date.
1. Company has received quality assurance certification from
the Association of American Railroads. This certification will help the company
to tap the huge US Railways demand for steel castings. Steelcast has thus achieved the distinction of becoming only the second
castings company in India to have got this accreditation. To tap this large market, Steelcast had formed a
50:50 joint venture company, Steelcast LLC
2. The AAR certification
will also give Steelcast a big advantage over other players while bidding for
contracts from the Indian Railways in future, especially the huge opportunities
that will emanate from the upcoming Delhi-Mumbai Freight Corridor.
3. Caterpillar
Inc is the biggest client and contribute nearly 20% of sales from 4,500 tons volume in 2011, company plan to
supply 10,000 tons in 2015. In terms of sales value, it will go up from Rs.
400mn to Rs. 1.50bn.
For this long term
agreement, Caterpillar has given an interest free loan of US$5mn (Rs 250mn) to
Steelcast. This loan has to be repaid over the next four years.
The new facility for Caterpillar will be located
within our existing production facilities at Bhavnagar in Gujarat.
4. In FY 2012, the short
term and long term debt put together is Rs. 840mn. The debt to equity is 0.56:1
and interest coverage is 2.78 times.
Good find. Will look to dig deeper. Technically, this stock always seems to take support at 200 dma in deep corrections. It touched 200 dma in dec-11, Sep-12, nov-12 and dec-12. It currently seems to be bouncing off it. Should be a good buy in the 50-55 region.
Steelcast has done pretty well over last 1 yr. The co has updated about good developments and prospects via announcements and if they deliver, stock should do well. However, in-past the industry and co has had volatile margins and hence I’m waiting for more clarity to re-enter.
[quote="vishal, post:1, topic:621502719"]
> Steelcast Limited is one of India's leading steel castings manufacturing company in the earthmoving equipment sector. Strong demand from user industries in India and globally has put the company on a high growth trajectory. Listed on the Bombay Stock Exchange (BSE), Steelcast Ltd. posted revenues of over Rs. 238 crore in 2011-12, with nearly 45% coming from exports, mainly to the USA and Germany.
>
> Company's product range is castings in carbon steel and low alloy steel. Some of the company's major clients are Caterpillar, Komatsu, Thyssen Krupp, JCB, Tatas, L&T, Essar & BEML.
>
> Steelcast's manufacturing capacity is 22,000 tonnes per annum and further expansion is planned in the coming few years. Company caters to the following industries: earthmoving equipment manufacturers, mining, mineral processing equipment manufacturers.
>
> Steelcast's state-of-the-art manufacturing facilities as well as registered office are located in Bhavnagar, Gujarat. Established as a partnership firm in 1960, the company got converted into a private limited company in 1972. Thereafter, in 1994, it came out with its public issue with equity participation from Kurimoto Ltd. of Japan. The Japanese company continues to have a 2.5% stake in the company to date.
>
> 3 YEAR FINANCIAL
>
> 12 months
>
> Sales
>
> |
>
> 238.12
>
> Export Percentage
>
> |
>
> 16.66%
>
> Other Income
>
> |
>
> 7.78
>
> Profit before tax
[/quote]
India’s leading steel castings manufacturer Steelcast Limited reported a 18.79% jump in net profit to Rs. 5.88 crore for the third quarter (Q3) ended December 31, 2012 over Rs. 4.95 crore in the previous Q3 of 2011-12. Net sales for current quarter at Rs. 81.35 crore were higher by 25.83% over previous fiscal’s third quarter turnover of Rs 64.65 crore.
__
For the 9 months ended December 31, 2012, the company’s net profit at Rs. 14.93 crore was higher by 44.25 % compared to a PAT of Rs. 10.35 crore in previous year’s 9 months. Net sales at Rs. 220.67 crore in current 9 months was up by 33.52% over Rs. 165.27 crore in previous year’s nine months
Dear Vishal…A very good find a few queries from my side…as you have stated the debt equity ratio is 0.56 am not able to find out cause as per my
calculations its comming approx 1.33 before bonus so pls help me to understand as i find debt more than equity
Secondin Jan 19 article of Business Standard as per your link it says as part of last lap an inspection team is going to come from U.S and once approval is received in
COUPLE of months …and in the IIFL article in interview of Mr Chetan on March 27 2012 he says… Also tell us about the negotiations with the American Association of Rail Road? Are you confident of clinching this deal?
An inspection team from US Rail Road Industry visited Steelcast Ltd. for audits and we expect to get formal approval by end of April 2012…So brother what do you make of it why is the approval delayed which was suppose
to come in by end of April of 2012, and now in Jan 2013 it says will come in couple of months .Pls guide me if i have overlooked anything.
Thread been inactive for long, in line with company’s performance since 2013 :-).
I will be attending AGM tomorrow, let me know if anything specific need to be asked. Thanks
Disc _ Invested recently.
Hi,
Re-framing the above note. Highlighted part (bold italics) is what was derived from management interaction. Rest I am putting as part of information since thread has been inactive for sometime.
Company Brief
The company manufactures steel casting products by adopting sand based manufacturing process by using No Bake and Shell Molding techniques. The annual production capacity is 30,000 MT. The manufacturing set up of the company comprises of 3 plants termed as P1, P2 and P5. For many years the company produced casting for OEMs in the Mining industry. It had several products designed and developed as per the requirements of the customers. The company utilizes its 3 plants according to the nature and description of the items to be produced with respect to its weightage and dimensions.
Big Capacity Expansion
In 2011, company entered into agreement with Caterpillar, which agreed to procure castings of 4800 tons in 2011, reaching upto 10000 tons in 2015. CAT provided interest free loan of Rs 22.5cr which had to be repaid in form of 5% of sales value over period of time. Company went for aggressive capacity addition from 13000tons in FY11 to 30000 tons in FY14.
Capacity Expansion and Troubles
With expansion, total Debt went up from Rs 40cr in FY10 to Rs 150cr in FY14 (which included Rs 22cr interest free loan from CAT). However, demand fell for end user and capacity utilization went to as low as 14% in FY15. This was first time (data checked since FY05) that company incurred EBIDTA loss. However, company avoided default through fund infusion at Rs 60/share (Rs 12cr). Company was largely relying on capex oriented demand which fell along with general slowdown in mining segment. Stretched balance sheet didn’t help the matters.
What went wrong ?
Aggressive capex with debt (though part of it was funded by client)
Over reliance on mining sector and that too capex driven demand. Mining accounted for 90% of revenue in FY13.
Turnaround and Improving Balance sheet(Largely derived from management interaction)
Capacity utilization is improving as we can see from the above table (though it’s been bit slow since last 2 years). Currently capacity utilization is close to 33% (10000 tons). What used to be few weeks visibility in terms of order book is now couple of quarters. Current order book stands at Rs 89 cr.
Company has repaid Rs 25cr debt in FY17. Total stands at close to Rs 100cr currently with Long Term Debt down to Rs 22cr (from 70cr in FY14). Even with low utilization, Steelcast has been able to pare down debt.
3) Mining segment contribution is down to 70% from 90% in FY13 and same is expected to go down to 40% over next 2-3 years. Number of Products has increased from 100 in FY13 to 300+ currently. There also has been new clients addition. One client can be as big as CAT, JCB over next 2-3 years.
4) Replacement demand which used to be nil is now 10% and company expects same will be 30% over next 2-3 years.
5) Company is one of the few companies in India with Forging and Machining division in the country and same is helping it to penetrate defence sector. It can be a decent contributor going ahead.
6) Domestic mining sector is yet to pick up and activity is largely happening in Defence sector. Globally mining sector is seeing good uptick. Demand is being largely driven by global orders. Caterpillar globally has been giving positive commentary recently (stock has recently touched all time high)
Outlook and Valuations
Steelcast Ltd is good play on operating and financial leverage. At 23% utilization, it did EBIDTA of 18%. With ramp in production, EBIDTA can move to 20%+. This coupled with repayment of debt, provides good financial deleverage play as well.
Company can do topline of Rs 200cr+ in FY18 (vs Rs 134cr in FY17). In Q1 FY18, Steelcast did topline of Rs 49cr with close to 19% EBIDTA. Usually Q1 is relatively weaker, hence top line of Rs 200cr+ looks very much achievable.
At EV of Rs 300cr, it is trading at 7.5x EV/E on FY18. Given that FY18 will be close to 33% utilization, probability of same improving over next 1-2 year looks high (given long down cycle since FY13).
