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Monday, August 22, 2011

Tata Sponge Iron Ltd:-Buy/sell/,growth prospects and recommendation,news and results,target price and analysis,view and outlook,multibagger

Scripscan:Tata Sponge Iron Ltd

Story:Tata Sponge Iron Limited engages in the production and sale of sponge iron in India. Its sponge iron is used by secondary steel producers for producing steel. The company also engages in the generation of captive power by using kiln waste heat with an installed capacity of 26 megawatt. It was formerly known as IPITATA Sponge Iron Limited.Cyclically, Q4 is always its best while Q1 is its weakest. So it would not really be prudent to compare sequentially. But even YoY, the performance has not been good. For Q1FY12, net sales was up just 3.5% at Rs.146 crore. Raw material cost rose 13%. EBIDTA was down 19% at Rs.34 crore and net profit was at Rs.22.52 crore, down 13%. Margins too have come down. OPM was down from 31% to 26% and NPM was down from 18% to 15%.This is India's leading manufacturer of sponge iron. 93% of its revenue comes from sponge iron and 7% from power. Tata Steel holds 39.74% stake.With a manufacturing facility in Bilaipada, Orissa, its sponge iron manufacturing capacity stands at 39,000 tonnes and generates 26 megawatt of power. The company procures its entire raw material requirement from Tata Steel. Market cap stands at Rs.475 crore. Annualised EPS stands at Rs.58 and this discounts the current price by less than 5 times.A good hold at present prices.

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