Recommendation From Steel-Tubes & Pipes Sector

TRY YOUR LUCK WITH GOODLUCK INDIA

HERE IS WHY
Government’s initiatives to tackle dumping 
from China
Attractive valuations 
Strong products and geographical segments

The steel demand has outpaced supply over the last five years, driven by rising infrastructure development and growing demand from the auto sector. As a result, steel consumption is expected to reach 104 MT by 2017. It is expected that consumption per capita would increase, supported by rapid growth in the industrial sector and rising infra expenditure projects in railways, roads and highways.

To tackle metal dumping from China and to remain globally competitive, Indian Stainless Steel Development Association (ISSDA) has recommended government to increase basic import duty on stainless steel (SS) flat products from 7.5 per cent to 12.5 per cent. At the same time, the association has recommended abolishing the import duty on key raw materials like ferro nickel, pure nickel, ferro moly and SS scrap.

Goodluck India is an engineering product manufacturing company. The company is engaged in the manufacture and exports of a range of heavy engineered structure, transmission and distribution tower, cold drawn welded (CDW) tubes, precision tubes, pipes, sheets and forged engineering products.

On the financial front, Goodluck India’s revenue increased by 9.56 per cent to Rs.574 crore in H1FY17, as compared to the same period in the previous financial year. However, the company’s EBITDA declined 8.77 per cent to Rs.50.59 crore in H1FY17 on a yearly basis. Its net profit also decreased 35.21 per cent to Rs.12.11 crore in H1FY17, as compared to the same period in the previous fiscal.

Goodluck India has performed financially and delivered good set of numbers over the last five financial years. The company’s topline increased by a CAGR of 7.6 per cent in FY12-FY16. Its EBITDA rose by a CAGR of 14.78 per cent over the last five fiscals ending with FY16. The bottomline of Goodluck India has increased at a CAGR of 10.55 per cent in FY12-FY16.

On the segmental revenue front, Goodluck India has earned 85.27 per cent from pipe/auto tubes/sheet/ structure, 13.96 per cent engineering goods and 0.77 per cent from steel product in FY16. The company has earned 73.3 per cent revenue from India and the remaining 26.7 per cent from outside India in FY16.

Goodluck India’s ROE and ROCE stood at 16.76 per cent and 16.39 per cent, respectively, in FY16. Though the company’s debt-to-equity ratio is higher at 1.68x in FY16, its interest coverage ratio is 2.19x, which gives visibility for paying out of the liability in future.

On the valuation front, Goodluck India’s share price is trading at TTM PE of 6.23x, as against its peers Technocraft Industries (India) (12.54x), Jindal Stainless (Hisar) (22.77x). The industry PE stands at 28.57x. The company’s PB ratio stood at 0.95x as against Technocraft Industries (India) (2.02x), Jindal Stainless (Hisar) (4.14x). It has given a dividend yield of 1.59 per cent to its shareholders.