Current price BSE 20.90

Sector Casting and Forging

No of shares 343.82 Million

52 week high 36.90

52 week low 14.52

BSE Sensex 28503.30

Nifty 8647.75

Average Volume BSE 82570

Average Volume NSE 303910

BSE Code 5000128

NSE Symbol ELECTCAST

Recommendation

– BUY/HOLD

Date – 13/03/2015

Electrosteel Castings Ltd.

Company Overview

Electrosteel Castings Ltd is largest manufacturer of ductile iron (DI) spun pipes in India. The company is a

water infrastructure company providing techno-economic solutions for water supply and sewerage systems.

They are engaged in the business of manufacturing Ductile Iron Pipes and Fittings and Cast Iron Pipes. They

also undertake turnkey solutions for water transportation and sewerage management, which include

manufacturing DI Pipes, supplying and laying various types of pipes, operating the system and transferring to

the owners. The company is headquartered at Kolkata and having their manufacturing facilities at Elavur in

Tamilnadu, Khardah and Haldia in West Bengal. Electrosteel Castings Ltd was incorporated in the year 1955.

To meet the ever growing demand of its quality products and with Electrosteel acquired 46% stake in Lanco

Industries Limited in March 2002, which is involved in manufacturing of DI Pipes, Pig Iron, Cement and

Castings.

With respect to strengthening India's own infrastructure, Electrosteel ventured into the Steel Manufacturing

industry through its promoted Company Electrosteel Steels Limited. An Integrated Steel Plant has been set up

which is capable of producing 2.5 Million metric tonnes of Hot Metal, which is further processed into Pig Iron,

Billets, TMT Bars, Wire Rods and Ductile Iron Pipes.

Presently, over 60% of its products are exported around the world and Electrosteel has its subsidiaries in

eleven countries.

The current market capitalisation stands at Rs 788.87 crore. The company has reported a standalone sales of

Rs 597.44 crore and a Net Profit of Rs 15.76 crore for the quarter ended Dec 2014.

Category No. of Shares Percentage

Promoters 189,224,372 53.01

General Public 75,319,327 21.10

Foreign - OCB 27,480,414 7.70

Financial Institutions 25,695,542 7.20

Other Companies 24,137,278 6.76

Foreign Institutions 7,425,814 2.08

NBFC and Mutual Funds 3,000,200 0.84

Foreign - NRI 2,294,332 0.64

Others 273,043 0.08

Market Cap (Rs Cr) – 788.87

Company P/E – 8.16

Industry P/E – 27.16

Book Value (Rs) – 61.71%

Dividend (%) – 65%

EPS (TTM) – 2.72

Dividend Yield (%) – 2.94%

Face Value (Rs) - 1

Share Holding Pattern Financial Overview

Industry Overview

The global forgings industry is expected to grow at a CAGR of 9.42% over 2012-2016. One of the key factors

of growth in this sector is the increasing demand from the automotive industry and international forgings being

outsourced from Asia and Africa.

The industry has grown by 32.1% in dealer's market worldwide and 40.2% in value during2013, ensuring the

profitability of the industry, globally. The deal value, which the forging industry achieved in 2012 was 203%

higher than 2009, thereby widening the market. Asia dominated production in the realm of forging steel

manufacture. In the overall business, there was a decline in the US and the European markets (Source:

Global forging industry outlook, 2012-2016).

India's forgings industry currently operates at 60-70% of its operational efficiency. New technology and mass

production could mean more efficiency and lower cost. As the demand for high quality heavy forged

components rises in India, major industry players look for joint ventures and partnerships for capacity

expansion and technology up-gradation. This creates opportunities for global players to establish or increase

their presence in India.

The automobile industry in India has flourished at a healthy rate of 20% yoy from FY2006 to 2012, but has

reported a slowdown with the current growth rate sliding under 8%.Over-dependence on the automobile sector

could increase the risk for this industry. The12th Plan promises high growth for industry segments like power

generation, petrochemicals and the ship building industries. This, in turn, is expected to generate a demand

for heavy forged components. Based on this growth, demand for Indian forged components is predicted to rise

up to4.9 million tons by 2015-16. To meet this demand forging companies have already started expanding

their capacities through joint ventures. Inclusion of non-auto components in their product portfolio will help

them capitalize on the growing demand in the non-auto forging segment

Dividend and Bonus History

Index and Company Price Movement Comparison

Balance Sheet

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sources Of Funds

Total Share Capital 34.38 32.68 32.68 32.68 32.68

Equity Share Capital 34.38 32.68 32.68 32.68 32.68

Reserves 2,412.86 2,321.77 1,670.35 1,652.15 1,551.10

Networth 2,447.24 2,354.45 1,703.03 1,684.83 1,583.78

Secured Loans 2,167.69 1,875.09 1,284.84 1,240.57 1,129.74

Unsecured Loans 34.29 187.81 247.44 231.06 112.19

Total Debt 2,201.98 2,062.90 1,532.28 1,471.63 1,241.93

Total Liabilities 4,649.22 4,417.35 3,235.31 3,156.46 2,825.71

Application Of Funds

Gross Block 1,641.16 1,583.97 987.40 914.36 842.01

Less: Accum. Depreciation 546.53 489.47 431.92 376.31 317.38

Net Block 1,094.63 1,094.50 555.48 538.05 524.63

Capital Work in Progress 1,210.82 986.09 655.81 447.18 390.96

Investments 1,099.96 1,142.60 1,118.72 1,399.88 1,023.96

Inventories 556.80 451.74 552.94 519.80 356.73

Sundry Debtors 616.86 656.61 619.20 488.63 374.11

Cash and Bank Balance 228.84 320.44 156.47 15.04 10.36

Total Current Assets 1,402.50 1,428.79 1,328.61 1,023.47 741.20

Loans and Advances 600.09 333.98 412.72 209.29 239.42

Fixed Deposits 0.00 0.00 0.00 174.70 270.56

Total CA, Loans & Advances 2,002.59 1,762.77 1,741.33 1,407.46 1,251.18

Current Liabilities 687.44 490.70 711.88 504.35 248.35

Provisions 71.33 77.92 124.17 131.74 116.68

Total CL & Provisions 758.77 568.62 836.05 636.09 365.03

Net Current Assets 1,243.82 1,194.15 905.28 771.37 886.15

Total Assets 4,649.23 4,417.34 3,235.29 3,156.48 2,825.70

Contingent Liabilities 750.01 1,757.05 2,187.50 272.74 225.79

Book Value (Rs) 71.18 72.06 52.12 51.56 48.47

Profit and Loss Account

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income

Sales Turnover 2,186.88 1,934.55 1,916.66 1,783.90 1,496.51

Excise Duty 0.00 0.00 0.00 41.68 38.43

Net Sales 2,186.88 1,934.55 1,916.66 1,742.22 1,458.08

Other Income 19.70 95.05 70.77 54.81 62.02

Stock Adjustments 29.64 -9.15 4.69 20.23 22.86

Total Income 2,236.22 2,020.45 1,992.12 1,817.26 1,542.96

Expenditure

Raw Materials 1,260.07 1,141.05 1,168.14 998.65 746.33

Power & Fuel Cost 158.15 148.46 142.12 126.41 105.16

Employee Cost 148.76 137.49 123.09 122.87 106.08

Other Manufacturing Expenses 0.00 0.00 0.00 17.65 21.89

Selling and Admin Expenses 0.00 0.00 0.00 162.42 132.49

Miscellaneous Expenses 344.48 308.14 381.28 45.29 54.84

Total Expenses 1,911.46 1,735.14 1,814.63 1,473.29 1,166.79

Operating Profit 305.06 190.26 106.72 289.16 314.15

PBDIT 324.76 285.31 177.49 343.97 376.17

Interest 135.82 111.24 100.65 78.60 46.40

PBDT 188.94 174.07 76.84 265.37 329.77

Depreciation 52.97 53.09 54.26 54.41 52.30

Profit Before Tax 135.97 120.98 22.58 210.96 277.47

Extra-ordinary items 0.00 0.00 0.00 3.92 28.41

PBT (Post Extra-ord Items) 135.97 120.98 22.58 214.88 305.88

Tax 35.41 23.75 -19.80 60.25 101.63

Reported Net Profit 100.56 97.23 42.38 154.64 206.29

Total Value Addition 651.40 594.09 646.48 474.64 420.46

Equity Dividend 22.35 16.34 16.34 40.84 40.84

Corporate Dividend Tax 3.80 2.78 2.65 6.63 6.78

Per share data (annualised)

Shares in issue (lakhs) 3,438.17 3,267.53 3,267.53 3,267.53 3,267.53

Earning Per Share (Rs) 2.92 2.98 1.30 4.73 6.31

Equity Dividend (%) 65.00 50.00 50.00 125.00 125.00

PBIT – 11.42 v/s 6.75

RoCE – 5.84 v/s 5.25

RoE – 4.10 v/s 5.29

Net Profit Margin – 4.55 v/s 4.79

Return on net worth – 4.10 v/s 4.12

D/E Ratio – 0.90 v/s 0.88

Interest Cover – 2.00 v/s 2.09

Current Ratio – 0.95 v/s 0.84

Reserves – 2412.89 cr v/s 2321.77 cr

PAT – 100.56 cr v/s 97.23 cr

Total assets – 4649.23 cr v/s 4417.34 cr

Net sales – 2186.88 cr v/s 1934.55 cr

Book Value – 77.18 v/s 72.06

Important Ratios(YoY)

Days BSE NSE

30 18.27 18.09

50 18.17 18.08

150 21.44 21.48

200 24.15 24.17

Simple Moving Average

Symbol Value Action

RSI(14) 55.983 Buy

STOCH(9,6) 39.429 Sell

STOCHRSI(14) 100.000 Overbought

MACD(12,26) -1.280 Sell

ADX(14) 26.920 Buy

Williams %R -20.482 Buy

CCI(14) 268.9266 Overbought

ATR(14) 2.1643Less

Volatility

Highs/Lows(14) 2.2393 Buy

Ultimate Oscillator 46.352 Sell

ROC 3.828 Buy

Bull/Bear Power(13) 6.5480 Buy

Technical Indicators

Investment Rationalize

Company was able to sustain its revenue growth even in the adverse market situations.

Reserves of the company stands at Rs.2447 Crores, which help the company in order internally finance its

financial requirements.

The domestic demand of Ductile Iron pipes fittings and Cast Iron pipes are supposed to increase mainly due

to major irrigation and water supply projects by the government.

Usage of cost effective manufacturing technology will add to the cost advantage of the company.

Entry into South American and African markets as well as improving economic situation in European market

will add to the companies revenue.

Advantage of first entry into market ie, Electrosteel Castings Ltd. is the first manufacturer of Ductile iron

pipes in India.

Current market price of the stock is well below the book value of Rs.61. Which means the stock is available

in discounted prices.

Growth forecast of the casting and forging industry and significant under performance of the company in the

current market rally will add to the growth prospects of the company.

Company is currently operates in very low capacity when it is compared with actual operational capacity, so

increase in market demand will help the company to operate in optimum limits which in turn add on to sales.