Jai Balaji Industries Ltd: Go get it!!
CMP: Rs.45

I have recommended this stock a number of times and always have felt it deserves a better valuation. The company at present price is immensely oversold by any means. There's no justification of these except panic selling by the retail investors fraternity. Be it the DII's or FII's or even the promoters they either have hiked their stake or have maintained holding whatever they were owning before. 

For short term as well as long term members at present prices it remains a gem of a buy for me.
Story:The company is one of the well known steel manufacturing group in Eastern India with diversified product range including Pig Iron, Sponge Iron, TMT bars, Ferro Alloys, Alloy Bars, etc. Five points which would prove why I feel it to be the next big thing. I have been tracking these company for the last several years. Before I pen the full story lets roll back to the past which would actually show what this class is all about. Six-seven years back it was a mere 1 lakh tonne per annum capacity company which hardly notched a notable revenue figure but came with a stunning guidance of being a million tonne company in the next four years. 

In those days mind you it wasn't the only one to sound big but had the company of several other conglomerates which came with similar kinda grandiose announcements and guidance. My fellow analysts fraternity which were tracking the counter giggled and dismissed the guidance as crap and absurd. Years went by and in a matter of only 42 months it pulled of the miracle of being a 1mtpa company. Now its not satisfied with just being a 1mtpa company as it has dream of being a 6-7MTPA company in the next 5-6 years. Its going on with a mammoth Rs.16000 Cr expansion plan (5 million tonnes steel, 3 million tonnes cement and 1,215 MW power plant in Purulia, for Rs.16,000 crore). It should be prudent to note that as on present date the market cap of the company only stands at Rs.261.28 Cr and its shares have a book value of Rs.152.72 Cr. 

The company should be a Rs.20000-25000 crs turnover company (depending upon proper implementation of capacities) in the next 5-6 years. The management has guided a 40% EBITDA for the same period, thanks to its gigantic rich coal reserves of 700 mt. With rising raw material prices and increased volatility, it plans to use its coal assets to increase raw material integration. The company holds varying stakes in four coal blocks-Dumri and Rohne in Jharkhand and Andal and Jagannathpur in West Bengal. If you look at Asia coal valuations its all over the place, still its anywhere from USD 3 per tonne to USD 25 per tonne so if you look at Jai Balaji, which has 700 million tonne of coal, it immediately gives you a huge intrinsic value for a lot of comfort. It ended FY11 with a sales of around Rs.2179.15 Cr. Well its actually hard to digest the humongous guidance given by the management but I have to go by Mr Aditya Jajodia's word as you all know by now he has got a habit of beating his own estimates.

The company is being recommended now since its Dumri coal block is expected to be operational anytime from now which should act as a trigger. Also the coke oven plant should get operational soon, which would save cost by at-least Rs.150-200 crs per annum. Go for it folks.

Courtesy: Arun Mukherjee, Kolkata (Calcutta).