Your stock queries
2/23/2012 9:30 PM Thursday
TATA SPONGE IRON
I wish to buy shares of Tata Sponge Iron. Will these be value accretive going forward if I buy them at the current market price?
- N Sabasiva Rao, Guntur, Andhra Pradesh
Tata Sponge Iron, BSE/NSE Code 513010/TATASPONGE, with a face value of Rs 10, is currently trading at Rs 299. Its 52-week high/low are Rs 379 and Rs 231 respectively.
Tata Sponge Iron engages in the production and sale of sponge iron in India. Its sponge iron is used by secondary steel producers for making steel. The company has a total production capacity of 390000 TPA from its three kilns. It also engages in the generation of captive power by using kiln waste heat, and has an installed capacity of 26 MW. The company was formerly known as IPITATA Sponge Iron.
On the financial front, the performance for 9M FY12 has been rather mixed. The topline witnessed de-growth of 7.60 per cent on a YoY basis, and stood at Rs 450.17 crore as against Rs 487 crore for 9M FY11. The bottomline witnessed a growth of a mere 4.32 per cent on a YoY basis, and stood at Rs 61.04 crore as against Rs 58.51 crore for 9M FY11.
On the valuations front, the company discounts its trailing 12-month earnings by 4.45x, which is much lower as compared to that of its other listed peers. The EV/EBITDA stands at 1.60x, and the company has no debt on its books, which is a good sign. Its dividend yield stands at 2.69 per cent. Keeping the valuations in mind, the stock looks like an attractive option to add to one’s portfolio, though the only glitch is the reduction in the topline numbers. Therefore, we suggest that you avoid the scrip for one more quarter and take a decision after looking at the full year’s numbers.
Is this the right price to enter the Advanta India counter?
- Kailash Bahety, Via Email
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