VN Research & Consulting
 Like us on facebook  Follow us on twitter  Follow us on LinkedIn  IndiaNotes on Google Plus  IndiaNotes on Pinterest  IndiaNotes on Stumbleupon  Subscribe to our feeds


Stocks  A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
Go
Feedback
You are here : IndiaNotes >> Research & Analysis >> Companies >> Mukand Ltd. >> Research

Mukand Ltd: Hold and add on dips to Rs. 61-66 band

HDFC Sec | 13 Jul, 2017  | Follow Author | Add to my Favourites 
  • Rate this article
    (Average Rating 0.0 Based on 0 ratings)



Company Background


Mukand Ltd is engaged in the business of stainless/alloy steel and machine building. Its alloy steel and stainless steel is widely in demand domestically majorly from the auto and auto ancillary industry. Its stainless steel is exported to various developed and developing countries. It has its steel manufacturing capacities at Hospet (in JV with Kalyani steels) and Thane and its steel rolling mills at Thane. It also has a captive power generation plant with a capacity of 15MW. Mukand is also engaged in the business of rolling of cold drawn bright bars of steel through its JV with Japanese company Sumitomo Corporation. Apart from the core assets, Mukand is enriched large land bank in the industrial area of Thane.


View and Valuation


Mukand has entered into a joint venture agreement with Sumitomo Corporation which shall help the company to market its alloy steel well in the local/global market and also bring down its debt levels using the capital infused by Sumitomo Corporation in the JV. Further, Mukand is looking out for a strategic partner to enter into another joint venture for its current industrial machinery division. This shall help company to further bring down its financial leverage. Mukand has a good amount of industrial land assets at Thane which it partially wishes to liquidate and use the said funds to bring down debt levels. All these efforts on a whole could bring down the otherwise exorbitant finance cost which at current is roughly 10.2-10.4% of the revenue from operations. Improving demand for company’s goods and services, cost reduction procedures carried out by company, lower debt levels, increase in sales due to Sumitomo Corporation’s marketing channels in the alloy steel business shall all help company report better performance going forward. An efficiently levered company after reduction of debt and improving prospects for its businesses could attract a better price going forward.


The stock currently trades at ~7.7x FY19E EPS. For a 70 year old company from a reputed family/group, this is low especially considering the fact that it has embarked on a number of initiatives to correct the financial and operating structure.


We feel investors could buy the stock at the CMP and add on dips to Rs.61 – 66 (4.5x FY19E EPS, 7.8x FY19 EV/EBITDA) for sequential targets of Rs.106.5 (9x FY19E EPS, 8.9x FY19 EV/EBITDA) & Rs.120.7 (10.5x FY19E EPS, 9.5x FY19 EV/EBITDA) over the next 2-3 quarters. Any development on finalization of JV partner for the industrial machinery division could lead to further rerating of the stock.

 


  Read full report Click here to read the full report

logo
BSE
93.75 -0.20
(-0.21%)
NSE
93.85 +0.00
(0.00%)
Read More
About HDFC Sec

HDFC Securities a trusted financial service provider promoted by HDFC Bank and JP Morgan Partners and their associates, is a leading stock broking company in the country, serving a diverse customer base of institutional and retail investors. HDFCsec.com provides investors a robust platform to trade in Equities in NSE and BSE , and derivatives in NSE. Our website will support you with the highest standards of service, convenience and hassle-free trading tools.


For more information please write in to [email protected]


Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.