Rohit Ferro-Tech Ltd: Buy on dips
CMP: Rs.11.90
In 2006, RFTL also expanded its wings into State of Orissa by installing a 110,000 mtpa manufacturing unit with 4 nos. 16.5 MVA furnaces at Kalinganagar Industrial Complex in Jajpur to manufacture bulk ferro alloys.
Recently, the company added another feather in its cap by fully commissioning its Manganese alloys production facility of 100,000 mtpa with 6 nos. 9 MVA furnaces in Haldia, West Bengal. The unit has got a status of 100% EOU.
Presently, with the total installed capacity of 300,000 mtpa, RFTL exports nearly 70% of its production.
Furthermore the company is setting up an additional 33 MVA SAF at its jajpur unit. The company is also in the process of setting up a 67.5 MW Captive Power Plant at its jajpur unit.
In an attempt to forward-integrate, RFTL has set up a 100,000 mtpa Stainless Steel manufacturing facility at its Bishnupur unit. On the side of backward integration, RFTL has acquired economic interest in Coking coal and Thermal coal mines in Indonesia.
Since its inception, the Company has come a long way to position itself as a leading producer of High Carbon Ferro Chrome. RFTL has accreditation like ISO 9001:2000, a Four Star Export House Status, Membership of ICDA (International Chrome Development Association), IMNI (International Manganese Institute) etc. The company recently got an award from EEPC as “Star Performer In Product Group - Medium Enterprise” on all India basis.
The company carries a part of its business activity through a Wholly owned Subsidiary Company M/S SKP Overseas Pte. Ltd incorporated at Singapore. During FY13, the Wholly Owned Subsidiary Company has acquired 60% equity stake in a company M/S PT Bara Prima Mandiri of Indonesia, a Company in which M/S SKP Overseas Pte. Ltd already had 60% economic interest . By virtue of the acquisition of equity stake M/W PT Bara Prima Mandiri of Indonesia has become a subsidiary of M/S SKP Oversea Pte. Ltd.
Since its inception, the Company has come a long way to position itself as one of the leading producer of High Carbon Ferro Chrome. RFTL has accreditation like ISO 9001:2000, a Two Star Export House Status, award for Export Excellence by EEPC, Membership of ICDA (International Chrome Development Association), IMNI (International Manganese Institute), etc.
Since its inception, the Company has come a long way to position itself as one of the leading producer of High Carbon Ferro Chrome. RFTL has accreditation like ISO 9001:2000, a Two Star Export House Status, award for Export Excellence by EEPC, Membership of ICDA (International Chrome Development Association), IMNI (International Manganese Institute), etc.
Shareholding Pattern: The promoters hold 72% (controlling) stake in the company while the general public holds 28%. In the general category, Shriramrathi Marketing Pvt Ltd, Anumati Stock Broking Pvt Ltd and Quest Financial Services Ltd holds more than 1% stake in the company.
Triggers:
- During FY13, the company had allotted 3, 35, 00, 000 equity shares at Rs.10 each on preferential basis at a premium of Rs.50 per share aggregating to Rs.201.00 Cr to the entities belonging to promoter group and strategic investors belonging to the non promoters group.
- The company is expected to install 67.5 MW captive power plant at its Jajpur unit. The basic engineering, civil work and structural fabrication has progressed significantly. All major equipment having long lead time has been received at the site and erection work is at the final stages. Since, Ferro-alloy sector is power intensive, it will save a substantial part of the cost of production.
- The basic engineering, civil and fabrication work of 33 MVA Arc Furnace at Jajpur unit is under progress. The company has placed order for all major Plant and Machinery and the delivery of the plant and Machinery are as per Schedule.
- The company has acquired 60% equity state in a coking coal mine in Indonesia owned by M/S PT Bara Prima Mandiri Through its Subsidiary M/S SKP Overseas Pte. Ltd, Singapore. The mine located in Central Kalimantan province of Indonesia has an estimated coking coal reserve of 10 MN tonnes.
- The company is also having 60% economic interest in thermal coal mine in Indonesia owned by M/S PT Palopo Indah Raya through its aforesaid subsidiary. The mine located in Central Kalimantan Province of Indonesia has an estimated thermal coal reserve of 20 MN.
- The Finance Minister in this budget could rationalize the tax and duty structures of the ferro-alloys sector. There are already talks of raising the import duty, so that foreign countries are not able to dump their cheap products in Indian markets, easily.
- India enjoys a natural advantage as it has the fifth-largest in chrome ore with a 100 million tones estimated reserve and the sixth-largest in manganese ore with an estimated 176 million tones reserve.
Conclusion: Ferro Alloys are used in the production of steel as de-oxidant and alloying agents and act as an intermediate industry to the iron and steel sector. The demand and prices of ferro alloys depend on the production and consumption of steel which in turn depends upon its user industries.
Many Ferro-alloys companies, has substituted iron ore with pallets.The UPA Government during their tenure introduced duty on export of Iron ore fines, which has resulted in reduction in export from 25 million tons earlier to 3 million tons. Due to this, there has been improvement in availability of Iron ore fines for conversion to pellets. Further, there are many pellets plants which are expected to come online in the next 6-12 months. This will in turn reduce the dependence of industry on sized ore and will in-fact be a new source of raw material, thus increasing the overall availability substantially. With this new source of raw material not only the availability of will increase but prices will also come down to normal level. Most of these plants are either merchant plants or their capacity is more than what is required by them captively for their own consumption. This will further increase the availability of raw material.
Moreover, this will in turn reduce the dependence of industry on sized ore and will in-fact be a new source of raw material, thus increasing the overall availability substantially. With this new source of raw material not only the availability of will increase but prices will also come down to normal level. Most of these plants are either merchant plants or their capacity is more than what is required by them for their own consumption. This will further increase the availability of raw material.
Due proactive steps taken by the State Governments and favourable Supreme Court verdict in Karnataka the mining sector is slowly limping back to its normal operational level.
Further, Orissa Government has also taken proactive steps and has recently allowed restart of mining in some of the mines, which is expected to alleviate the scarcity of raw material. The yield from Pellets is higher than yield from poor quality material.
However, the UPA government also imposed a 5% export duty on iron ore pellets, an agglomerated form of the raw material. Now, while the Associated Chambers of Commerce and Industry of India was of the view that the government should raise the export duty on iron ore pellets even further to safeguard the interests of India’s steel industry, the Pellet Manufacturers’ Association of India has demanded that commerce ministry remove the duty, claiming it was choking the industry and would stunt growth.
Insiders have told the media that the Steel and Mining Minister seems inclined to continuing allow the export tax to stand. When asked for his reaction, Tomar told news agency, the Press Trust of India (PTI), that a conciliation had to be reached on the two issues, and that his ministry was studying both demands.
Though the Steel demand was low in 2012-14 due to continuing economic crisis and fall in the Indian GDP growth, however, spurt in demand is expected in 2014- 15. The Government of India has planned to invest about Rs.56.32 lakh crore in infrastructure during the 12th Five Year Plan period 2012-17. This will augur well for the industry.
Besides, the market cap of the company is only Rs.136.30 Cr and the book value of the shares of the company is Rs.50.87, as compared to the CMP of Rs.11.90.
Many Ferro-alloys companies, has substituted iron ore with pallets.The UPA Government during their tenure introduced duty on export of Iron ore fines, which has resulted in reduction in export from 25 million tons earlier to 3 million tons. Due to this, there has been improvement in availability of Iron ore fines for conversion to pellets. Further, there are many pellets plants which are expected to come online in the next 6-12 months. This will in turn reduce the dependence of industry on sized ore and will in-fact be a new source of raw material, thus increasing the overall availability substantially. With this new source of raw material not only the availability of will increase but prices will also come down to normal level. Most of these plants are either merchant plants or their capacity is more than what is required by them captively for their own consumption. This will further increase the availability of raw material.
Moreover, this will in turn reduce the dependence of industry on sized ore and will in-fact be a new source of raw material, thus increasing the overall availability substantially. With this new source of raw material not only the availability of will increase but prices will also come down to normal level. Most of these plants are either merchant plants or their capacity is more than what is required by them for their own consumption. This will further increase the availability of raw material.
Due proactive steps taken by the State Governments and favourable Supreme Court verdict in Karnataka the mining sector is slowly limping back to its normal operational level.
Further, Orissa Government has also taken proactive steps and has recently allowed restart of mining in some of the mines, which is expected to alleviate the scarcity of raw material. The yield from Pellets is higher than yield from poor quality material.
However, the UPA government also imposed a 5% export duty on iron ore pellets, an agglomerated form of the raw material. Now, while the Associated Chambers of Commerce and Industry of India was of the view that the government should raise the export duty on iron ore pellets even further to safeguard the interests of India’s steel industry, the Pellet Manufacturers’ Association of India has demanded that commerce ministry remove the duty, claiming it was choking the industry and would stunt growth.
Insiders have told the media that the Steel and Mining Minister seems inclined to continuing allow the export tax to stand. When asked for his reaction, Tomar told news agency, the Press Trust of India (PTI), that a conciliation had to be reached on the two issues, and that his ministry was studying both demands.
Though the Steel demand was low in 2012-14 due to continuing economic crisis and fall in the Indian GDP growth, however, spurt in demand is expected in 2014- 15. The Government of India has planned to invest about Rs.56.32 lakh crore in infrastructure during the 12th Five Year Plan period 2012-17. This will augur well for the industry.
Besides, the market cap of the company is only Rs.136.30 Cr and the book value of the shares of the company is Rs.50.87, as compared to the CMP of Rs.11.90.
Going forward, the demand for Ferro Alloys is excepted to improve due to increase in investment plan in road sector, expansion in railways, increase in volume by automobile sector, uses of special steel in power sectors and refocus on the manufacturing sector.
The scrip should bounce from the oversold positions and move up on the optimism of new power plant coming up. The stock could be accumulated around the support region of Rs.11.70-12, for a target of Rs.16-17 in the coming days.
The scrip should bounce from the oversold positions and move up on the optimism of new power plant coming up. The stock could be accumulated around the support region of Rs.11.70-12, for a target of Rs.16-17 in the coming days.
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