Suggested buy price:29(6.4.2009)
2)Scripscan:Uttam Galva Steel Ltd
Story:Uttam Galva Steel is one of the bigger independent steel processors in India.It produces value-added products from HRC, viz CR steel, galvanised steel and colour-coated sheets.The domestic demand for such value-added products is quite strong and the company plans to cater more to the domestic market. Unless there is a huge price volatility in HRC/zinc prices, mostly the processor’s margins are fixed and the company continues to earn good margins.But due to volatility in inputs like zinc, margins could suffer in the short term. For FY09-10,the growth in topline and bottomline could be high as margins are likely to remain stable.A good steel stock to own at dips.
Present update:Uttam Galva Steel presently is 35 per cent owned by Arcelor Mittal Group and is looking to grow the profitability of the company over the next quarter.The current operating profit margin (operating profit as a percentage of sales) is around 10 per cent. The company is planning to focus on cutting costs and improving the product mix.Raw material prices have come down and the company is not planning to increase value added steel product prices.Even if the company is able maintain prices at current levels, it will have a positive impact on profits.The company makes galvanised steel used in construction and automobile industry.There is little growth in demand for steel products at this juncture. There is a contraction in the apparent steel demand that industry estimates.This has pushed steel producers to cut production and reduce inventory.The company expects the next quarter to be better than the December 2011 quarter.Press reports few days ago said that the company was looking to acquire Global Steel Philippines, a distressed company. To which the management clarified that there is no interest in that business and Uttam Galva did not see any raw material or geography synergy.The company already provided 250% gain and looks good for more.Hold on.