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Sunday, October 25, 2009

Lanco Industries Ltd:Future growth prospects and outlook

Scripscan:Lanco Industries Ltd

Story:Owned by Electrosteel Castings, Lanco Industries manufactures about 180,000 tpa of ductile steel pipes that are primarily used for the transportation of drinking water. The Rs 650 crore entity had a reasonably good FY09, with after tax profits at Rs 18 crore, that work out to Rs 5 in EPS. For the first half of FY10, Lanco Industries has reported a 17 per cent increase in Revenues to Rs 345 crore (Rs 294 crore), with after tax profits of Rs 25 crore (Rs 9 crore) a yoy jump of 277 per cent.With cost key raw material inputs having come down, and rupee appreciation actually making imported coke cheap the margins of the corporate are looking up. At a prospective EPS of Rs 12 for FY10, Lanco Industries is the cheapest stock in the ductile pipes space. A reasonable PE for this type of business would be 7 to 10 giving the scrip a 12 month prospective price target of Rs 84 to Rs 120. Middle East based Trinity Holdings is a large investor in the company holding 28 lakh shares. Of these 13 lakh got sold at Rs 44.50 couple of days ago on the NSE and BSE..the balance should also get absorbed over the next few days, making the grounds cleared for a take-off in the scrip price.Lanco Industries Ltd may certainly turn to be a scrip to write a new scripture for itself.A value buy at dips.

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