Stock Pick from Metals Sector
2/7/2013 9:00 PM Thursday
Low Priced Scrip is hidden gem, today's underdog, a stock with future potential that is expected to fetch returns within 1 year. This is a stock picked carefully based on a fundamental analysis of the company.
The company recommended as the Low Priced Scrip for this issue is Tinplate Company of India
Tinplate Company of India (TCI)
A Sheet Anchor
Here is Why
- It is a market leader in the production of tin coated and tin free steel sheets in India.
- The addition of its second CRM in FY12 has helped reduce its dependence on imports of black plates and improve its margins.
- It has posted good numbers in 9MFY13, with income from operations growing by 30 per cent to INR 614 crore and the net profit up 20 per cent to INR 19.65 crore.
It belongs to one of the largest and oldest industrial groups in the country, is an industry leader and has been paying good dividends in the recent past. We are referring to Tinplate Company of India (TCI), a part of the Tata Group.
TCI is the largest producer of tin coated and tin free steel sheets in India. It is a market leader, with a share of around 35 to 40 per cent in these products. It is one of the oldest companies in the industry, in operation for over 90 years now. 75 per cent of its total revenues come from the domestic market, while the remaining 25 per cent come from the export market primarily spanning across South East Asia, the Middle East and some developed countries in Europe.
It operates two plants each of Electrolytic Tinning Lines (ETLs) and Cold Rolling Mills (CRMs) located at Jamshedpur. For FY12, ETLs produced an aggregate of around 255679 tonnes of Electrolytic Tinplate and Tin Free Steel, while its CRM produced around 261403 tonnes. With the commissioning of the second CRM in FY12, the combined black plate production from the two CRMs was about 30 per cent higher than in FY11. This has helped the company to reduce its dependence on imports. Historically, the prices of black plate have been volatile, impacting the company’s margins. Now on, the company would be less dependent on the import of black plates, which would improve its margins further.
|SHAREHOLDING PATTERN AS ON 31/12/2012|
|Promoters ||74.96 |
|Insurance Companies ||0.59 |
|FII ||0.15 |
|Bodies Corporate ||6.35 |
|Individuals ||17.88 |
|Others ||0.07 |
|Total ||100 |
Tinplate is a value added steel plate product that has an extended shelf life and good printability, and is therefore widely used in the packaging industry. Around 65 to 70 per cent of the global tinplate consumption is for processed foods and beverages. It is also an easily recyclable packaging medium, which makes it increasingly more relevant in view of environmental concerns.
In a bid to stay ahead of its competition, TCI is focussing on reducing material wastages and rationalising its costs. It is also consistently strengthening its relationship with the brand owners by providing superior quality of cans.
Financially, the company did face some issues in the past but has shown signs of improvement over the recent quarters. For FY12, its revenue from operations declined by 21 per cent to INR 627 crore while the net profit stood at INR 16.55 crore against INR 35.81 crore during the corresponding period. In the first nine months of FY13, though, TCI postedgood numbers. Its income from operations grew by 30 per cent to INR 614 crore in this period, while the net profit was up 20 per cent to INR 19.65 crore, already exceeding its FY12 profits. It is also a low-debt company, with a total debt of INR 133 crore. The debt-to equity ratio stands at 0.22x.
|Best of Last One Year|
|Reco. price||Price as |
|Name of Company ||Price (Rs) ||05/02/2013 ||Gain |
|Omkar Specialty Chemicals ||58.50 ||135.00 ||130.77% |
|PTC India ||45.00 ||74.00 ||64.44% |
|GIC Housing Finance ||84.00 ||130.00 ||54.76% |
|Syndicate Bank ||97.30 ||132.00 ||35.66% |
|Finolex Industries ||58.30 ||78.80 ||35.16% |
|Umang Dairies ||44.70 ||60.00 ||34.23% |
|Dena Bank ||80.50 ||106.00 ||31.68% |
|Manjushree Technopak ||80.00 ||103.00 ||28.75% |
In September 2012, Tata Steel had acquired 14.65 lakh shares of TCI at approximately INR 60 per share to increase its stake to 73.44 per cent from the previous 59.44 per cent. The current market price is also well below the promoters’ acquisition price, and we believe that there is good upside in the stock going ahead.
A noteworthy factor about this company is its good dividend paying track record, especially over the past couple of years. For FY12, it paid a dividend of INR 0.85 per share, resulting in a dividend yield of 1.7 per cent. On the valuations front, the stock is available at a PE multiple of 21x its FY13E EPS of INR 2.30 per share, which we believe is fair enough. Hence, one should invest in the counter with a longer-term perspective.
|LAST FIVE QUARTERS (Rs/Cr)|
|Particulars||Dec 2012||Sep 2012||Jun 2012||Mar 2012||Dec 2011|
|Net Sales ||241.66 ||201.21 ||164.64 ||154.55 ||148.58 |
|Other Income ||2.07 ||2.32 ||2.32 ||1.2 ||0.6 |
|Total Income ||243.72 ||203.54 ||166.96 ||155.75 ||149.18 |
|Raw Materials ||0 ||0.35 ||1.88 ||7.14 ||3.3 |
|PBIT ||16.52 ||10.9 ||7.59 ||0.87 ||10.68 |
|Interest ||6.65 ||6.11 ||6.7 ||6.35 ||4.3 |
|Net Profit ||11.16 ||7.02 ||1.48 ||0.16 ||8.41 |
|Equity ||104.8 ||104.8 ||104.8 ||104.8 ||104.8 |
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