Saturday, February 20, 2010

Bhushan Steel Limited

Bhushan Steel Limited

Bhushan Steel Ltd is a globally renowned one of the leading prominent player in Steel Industry. Backed by more than two decades, of experience in Steel making, Bhushan Steel is now India’s 3rd largest Secondary Steel Producer company with an existing steel production capacity of 2 million tones per annum’s (approx.)

The Company has manufacturing in the three states of india like Uttar pradesh, Orissa and Maharashtra. The Product line has variety of products such as Cold Rolled Closed Annealed, Galvanized Coil and Sheet, High Tensile Steel Strapping, Colour Coated Coils , Galume Sheets and Coils, Hardened & Tempered Steel Strips , Billets, Sponge Iron, Precision Tubes and Wire Rod.

Quarterly Results

The Company has posted a net profit of Rs 2274.30 million for the quarter ended December 31, 2009 as compared to Rs 207.40 million for the quarter ended December 31, 2008. Total Income has increased from Rs 10064.00 million for the quarter ended December 31, 2008 to Rs 14546.40 million for the quarter ended December 31, 2009. EPS grew manifold in quarter ending December 2009 and stood at Rs.53.55. TTM ( Trailing twelve months ) EPS stood at 165.97

Investment Rationale

Efficient tie-up with Japanese firm Sumitomo.
Acquisition of Bowen Energy

Capacity expansion

Bhushan Steel has Rs.20,000 crore as expansion plans through Bengal Steel project. It’s a Greenfield steel plant and it will be put up in a new company. Sumitomo is very keen to have a stake in the new steel company. The project is still at a nascent stage and the land acquisition will take some time. Once that is done the project will not be commissioned earlier than 2014-15. The steel project in Bengal is definitely a large investment and the company is looking for a JV with Sumitomo.

Valuations

With the acquisition of bowen energy, Strong Relationship with Sumitomo and a plan to setup steel project in bengal are the key drivers for the growth in coming future also the capacity expansion at it's orissa planet to 5 million ton by oct 2012 will add value.

The stock is Currently trading at PE of 9.7 to its TTM earnings & 3 times its book value of 477.79. Since the stock offers good opportunities it become a attractive long term BUY for investors.

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Research Team, Multibaggers.in

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