Monday, February 16, 2015

Rohit Ferro Tech Ltd: Q3FY15 Result  Update
Rohit Ferro Tech Ltd (Rs.8.40), a smaller player in the ferro alloy and stainless steel segment, reported a Net Loss of  Rs.67.94 crore in the quarter ended December 2014 as against net loss of Rs.56.83 crore during the previous quarter ended December 2013. Sales however, rose 3.28% to Rs.521.98 crore in the quarter ended December 2014 as against Rs.505.39 crore during the previous quarter ended December 2013.

But, if we compare Q3FY15 and Q2FY15 results (or sequentially), we will notice some improvement in the topline and bottomlines, proving that turnaround is on the anvil. 

The total income of the company in Q3FY15, came out to be Rs.526.58 Cr as against Rs.524.06 Cr in Q2FY15--showing slight improvement in the topline when compared sequentially.

Moreover, the total expenses came down to Rs.542.11 Cr in Q3FY15 as against Rs.597.61 Cr in Q2FY15 and 555.76 Cr in Q3FY14.

The net loss of the company before Other Income, Finance Cost and Exceptional Items came down drastically to Rs.15.53 Cr in Q3FY15 as against Rs.73.55 Cr in Q2FY15 and 43.05 Cr in Q3FY14.

The net loss of the company for Q3FY15 came down to Rs.67.94 Cr as against Rs.86.35 Cr in Q3FY14 and 120.06 Cr in Q2FY15, proving once again that it is a turnaround case and  is likely to give good returns over a period. 

Rohit Ferro Tech Ltd has a 274,000-tonne capacity to produce ferro alloys used in stainless steel making. In the coming Budget: 2015-16 any tinkering of import duty structure will likely to benefit the company, because of its forward integration, which includes 100,000-tonne stainless steel capacity. 

The net loss of the company increased a bit in Q3FY15, because as a matter of prudence the company did  not recognize the deferred tax assets for the quarter under review. 

The board of directors of the company in its meeting held on December 29, 2014 has approved the proposal to sale, transfer or otherwise dispose off the manufacturing unit of the company located in Jajpur, Odisha as going concern by way of slump sale or otherwise subject to the approval of the shareholders that has been sought by way of postal ballot dated January 10, 2015.

Besides, the company is in the process of setting up an additional Sub Merged Arc Furnace of 33 MVA and a Captive Power Plant at its Jajpur Unit. The management expected to complete the same by March 31,2015.

Pursuant to CDR package, the company has received unsecured loans amounting to Rs.70.31 Cr from companies as promoter's contribution, to be converted into equity by March 31, 2015, at such price as will be  determine in accordance with the SEBI regulations. 

This makes, this a strong case for Buy at the CMP of Rs.8.40, for a medium term target of Rs.12-14.
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