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Wednesday, August 5, 2009

Usha Martin Ltd:Result updates and business prospects

Scripscan:Usha Martin Ltd
Traded in:Nse-bse

Story:Usha Martin is India's largest and the world's second-largest manufacturer of steel and wire ropes. It is engaged in the manufacture of steel wire rods, wires, wire ropes, and other related products. It is a global company withpresence, either through manufacturing or sales and marketing, in over thirteencountries. In India, its manufacturing facilities are located near Ranchi and Jamshedpur in Jharkhand and Hoshiarpur in Punjab. The company has various overseas subsidiaries, with manufacturing facilities located atThailand, UAE, and UK. It also has a wide marketing and distribution network in India, Singapore, America, Scandinavia, the UK, Dubai, and South Africa.The Future of wire and wire ropes, which find major applications in construction, heavy industries and automobile industry, looks bright due to huge infrastructure spending program in India, Middle East and other parts of the world. UML, being a world leader in integrated wire rope manufacturing, would definitely reap this global opportunity.came out with its 1QFY10 result which was dismal at operating level. However, the Company maintained its non-operating expenses (depreciation, interest cost) at lower levels during the quarter.Performance of domestic business was quite subdued primarily due to lowerrealization as well as high cost of raw materials. All the subsidiaries, however, performed well, despite lower sales volume, with significant improvement in margins. We are positive on the business outlook of UML and expect the Company to perform better from 2QFY10 onwards We are positive on the business outlook of the Company.As the CMP of Rs.53, the stock trades at 5.4x, 1x, and 5.8x its FY10 P/E, P/BV and EV/EBITDA respectively. We have reduced our FY10 standalone EPS estimate to Rs.6.1 from Rs.7.6 earlier. However, we have maintained our FY10 consolidated EPS estimate at Rs.9.7 due to better performance of subsidiaries. We maintain 'BUY' rating on the stock with target price of Rs 73.

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