Monday, September 20, 2010

Adhunik Metalinks ...cmp Rs 116.30.....a case of Valuation....

Many times we look at the valuation.Whether a stock is over valued or undervalued or fairly valued.
I remember I have written in length about "VALUATION"....if someone can write it in "search "tab here on right of my blog one can find that writeup.....
I never am able to understand how analyst decides on Valuation of certain stocks......Valuation is constantly changing parametres and one need to be in constant touch of any development taking place in that perticular stock....just one big order or some collobaration and valuation can come up or go down drastically......

Well, Adhunil Metalinks is the same case of Valuation.I just went through a report of Adhunik on DNA Money site and ended up on this report which I am pasting here for my readers......

Adhunik to benefit from mining, power foray

Published: Monday, Sep 20, 2010, 3:40 IST

By Nitin P Shrivastava
Place: Mumbai
Agency: DNA
As the domestic economy continues to remain on firm footing, infrastructure spending and consumption would continue to spur the demand for steel products.

Adhunik Metaliks, a mid-size steel player is set to reap the benefits of its backward integration plans, ramp up in merchant mining volumes and its recent foray into power segment.

Adhunik Metaliks manufactures alloy steel, special steel and stainless steel, catering to automobile, engineering, power, oil & gas and construction sectors. The company has recently diversified itself into the mining and power segments to generate additional revenues.

Steel segment:
The company derives about 84% of revenues from this segment. It focuses on value added products from its single manufacturing plant, which has a total installed capacity to produce 0.45 mtpa of steel. Adhunik has an installed capacity to produce around 0.21 mtpa of pig iron and 0.3 mtpa of sponge iron. The company is looking to expand its sponge iron making capacity from 0.3 mtpa to 0.4 mtpa in next two years.
Adhunik’s focus to up the share of alloy revenues to total sales from 54% to 70% in the coming years would result in better realisations, increasing revenues.
The company sources 40% of its iron ore requirements from the merchant mines of its subsidiary, Orissa Manganese & Minerals (OMML). Adhunik has been allocated captive iron ore mines with reserves of 25 mt, which are expected to be partly operational in next 3-4 months. These would help company to meet close to 60% of total ore requirements in FY12. Also, the company has been allocated captive coal mines which are expected to get operational by FY13.Adhunik is able to meet 40% of the power requirement in-house, through its captive plantof 34 mw currently, which is being ramped up to generate 80 mw in the next two years.

Mining segment:
This high-margin segment contributed 16% of consolidated revenues in FY10, which is expected to grow substantially as mining volumes go up. Adhunik, through OMML, possesses iron ore and manganese ore mines with reserves of 97 mt and 53 mt, respectively, both of which are expected to last over 30 years. The company, which mined 1.15 mt of iron ore and 0.14 mt of manganese ore last year, plans to enhance production gradually over next 1-2 years resulting in higher sales.
Furthermore, the company plans to set up 1.2 mtpa pelletisation plant (expected by Q4FY12), an iron-ore beneficiation plant 0.05mtpa ferro alloys plant along with 30 mw captive power plant, to convert low-grade materials into pellets which would provide better realizations.

Power segment:
The company is also venturing into the merchant power business through its subsidiary Adhunik Power and Natural Resources Ltd (APNRL), which is planning to set up a 1080 mw thermal power plant, to be commissioned in three phases.The company has already achieved financial closure of the first two phases of 270 mw each to be commissioned by April 2012. APNRL has signed a power purchase agreement with Tata Power for selling 100 mw.

Investment rationale:
Adhunik’s backward and forward integration efforts would result in huge benefits for the company in 2-3 years. Through forward integration, the company is looking to increase sales of value-added products ands this is likely to result in improved realisations and higher revenues.
The firm’s efforts to ramp up the capacities of finished value-added steel products from 0.45 mtpa currently to 1.2 mtpa by FY15, on back of improving demand from automobiles and construction sector will help the company to garner higher volumes and sales.
Captive raw material sourcing through its iron ore and coal mines is likely to ensure fuel security and reduce costs, aiding net profit margins. Rise in production volumes in its mining business and improved realisations from planned investments would further boost revenues and margins. The management expects the power business to contribute 20% to company’s consolidated revenues from FY13 onwards.

Any slowdown in the auto and construction sectors may impact volumes and a fall in prices of ore and steel may also lead to lower revenues. Adhunik also faces execution risks in adding additional capacities both in steel and power segments. Any delays in its captive mines getting operational due to environmental issues or otherwise could also lead to delay in accrual of benefits and thereby impacting the profits.


Driven by higher volumes in its steel and merchant mining businesses, Adhunik’s revenues are expected to grow at a compounded annual growth rate (CAGR) of 24% over FY10-FY12. Net profit is likely to grow at a CAGR of 47% on benefits out of backward integration and higher margins in the mining segment. At a current market price of Rs116.30, the stock trades at P/E ratio of 6.35 times expected FY11 earnings and 4.87 times FY12 expected earnings respectively. The stock can be looked at current levels from long term perspective.

My Analysis :
Well, what catch my eys in this report are Mining segments and Power segments.That is the catch here.
Now eps of Adhunik Met is 4.80 for Mar 2010 and price is 116 means discounting the last year eps at if someone just look at the p/e and see then one will only come to the conclusion that at 24 p/e Adhunik is overvalued....but when one goes in deeper, and try to take account of 1080 MW thermal power plant and that the Coal used for the power plant they already have acquired through their subsidiary Orissa Mangenese and Mineral then it looks like, the valuation will becomes cheap when the plant gets operational in by Apr 2012.
The Iron Ore mines will also add to the bottomline of Steel Plant as they have already have Iorn Ore mines which will be good for them for next 30 yrs.....Excellent!
Well, I was not tracking this Co so I was not able to get this annoucement in time...otherwise we would have been early bird in this counter...maybe around 30-35 range when it was in Apr 2009...but after that the stock has been in constant upmove .....making a very good base at price 95 and 100.....
Well, friends I leave it to you to decide whether one should go with Adhunik or wait for some downside....that maybe of 10-15%....not more.....but 97 mt and 57 mt iorn ore and Coal mines are big quantity.....
Those Co having Iron Ore Mines and Coal Mines are going to be benifitted in big they will not have to depend on that from others.......
But surely, market is discounting the mines of iron ore and Coal ....for Adhunik and giving thumbs up on valuation ......
Readers are invited to write some other stocks which have already have got Mines rights through its sub or directly......


  1. Hi Rajeev
    Thanks for replying to my queries earlier.
    Recently Telecanor announced about some changes in its functional heads, Amit Vasant Joshi currently Head - Mobility Solutions at Atom Technologies is appointed to oversee the Payment Gateway Business of the Company.

    Mr. Shailender Misra who worked with NetXCell as Senior Manager (VAS) has joined the company in the VAS department.

    I saw profile of both Atom Technologies and NetXCell and was quite impressed, so just wanted to know if both these persons joining Telecanor is highly +ve for the company.

  2. Minar,
    Finally it seems that Telecanor management is doing the right things....let us hope for the best.....

  3. Rajeev,

    How do u see Long term IKF technology, hazoor, and yashraj. All three are nagative for some time.
    Should keep invested or exit?

  4. Hi Rajeev,

    Hope you are doing good.
    Many thanks for all the tremendous job you are doing throughout.
    I have a query regarding Vijay Shanti Buliders. They are merging a promoter group company High End Homes Pvt. Ltd. Now that will double the equity base of the company to Rs.26 cr.and increase the promoter`s shareholding dramatically higher.
    So what's the impact on the small investors?
    With the books of High End Homes it looks Like the only thing on the sheet is Rs.40 cr. loans & advances. The company does not want to disclose to whom they have lent and if it is recoverable.

    Kindly Suggest.


  5. Hi Rajeev,

    Eager to see your views on current IPO's of Eros International, Elctrosteel & Ramky Infra

  6. wk,
    I already wrote that these stocks are high risk high gain(HRHG) one should invest as the money is written off.....because such stocks moves any one can't sell it even...

  7. Varun,
    I have not gone through this merger and I do not track Vijay Shanti that no view...

  8. satish,
    I am not much interested in the above three....

  9. hi rajeev,

    did u have, by any chance looked at Mahindra ugine, (MUSCO), i think it would do well, as the mahindra's as a group is in good action. would like ur vies on this one.

    Wrm Rgds.

  10. JK,
    Yes MUSCO looks good and I have already talked of it before....

  11. Raju bhai
    i m very bullish on pvp venture on long term.
    i want add more this scrip at cmp due to land bank.
    please advice me can i add more at cmp. stock quote near 52 week low level from long time.
    please advice me whether i add more at cmp or ignore
    thanks in advance

  12. Hi Rajeev,

    This time markets has no stopping .. look like market breaks 20000 in tomorrows trade. Rajeev dont you think that this time in mining sector goverment companies run faster than private companies due to naxalite problem . I heard that govt making draft that company has to spend major protion of earning in development of that area . and i think this thing only govt can do. Today gmdc gain 7%.

  13. Hi Rajeev,

    You once said you are big time bullish on Vijay Shanthi. Is there something about it that has caused you to loose that interest in it now?


  14. Rajeev Bhai,
    News I would like to share with everybody...
    Jhunjhunwala, Damani pick up 11% of Delta Corp

    Mumbai: A clutch of investors including stock brokers Rakesh Jhunjhunwala and Radhakrishna Damani have picked up an 11% stake in Mumbai-based real estate and hospitality firm Delta Corporation Ltd. for Rs200 crore, a banker familiar with the development said.

    The investors will get equity for Rs120 crore and will further subscribe to Rs80 crore of warrants that can later be converted into stock. Jhunjhunwala will join the Delta Corp. board.

    India’s leading corporate lawyer Zia Mody of AZB Partners Ltd and her husband Jayadev Mody will invest Rs70 crore as part of the promoters’ contribution. Both together own 48.40% in the real estate developer.

    An announcement is expected to be made later in the evening today.

    On 17 September, the company had informed the Bombay Stock Exchange that the board would consider a preferential allotment to one or more investors to raise up to Rs275 crore in a meeting on 20 September.
    Multiple block deals in Delta Corp

    India Infoline News Service / 11:01 , Sep 17, 2010

    Delta Corp has witnessed multiple block deals at average price of Rs66 per share.

    The board meeting for Delta Corp is to be held on Sept. 20 to consider preferential allotment.

    Delta Corp Limited, formerly Arrow Webtex Limited, is an India-based company. The Company operates in four business segments: entertainment and gaming, real estate, hospitality and aviation. The Company operates Casino Royale, an off-shore casino on the Mandovi River in Goa. It also operates another off-shore casino called King’s Casino. The Company operates through Delta Corp East Africa Limited (DCEAL), in the real estate sector. DCEAL has 10 parcels of land admeasuring approximately 803,720 square feet in Nairobi. The Company operates in the hospitality segment through its subsidiary, Delta Hospitality Pvt. Ltd., which owns 35% equity in Advani Hotels and Resorts India Ltd. The Company operates in the aviation segment through AAA Aviation Pvt. Ltd., which is a 90% subsidiary of the Company. Effective April 1, 2008, the Company demerged its textile business into a separate company called Arrow Textiles Limited.

    Rajeev bhai, What is happening in this counter which has become the centre of attraction? Your views please.


  15. Mayur,
    Delta Corp is Old Arrow Webtex and I replied in one query here that it ran from 3 to over 675...
    Gambling is human nature.Stock Market is also one type of gambling where one invest and see whether he gets corrects or not otherwise he loses.....

  16. I read somewhere that at Macau (Asia's Las Vegas), 20% of the visitors are Indians... So imagine what a huge opportunity exists if organised gambling moves beyond Goa and UTs like Daman. Besides Delta Corp is into real estate with Peninsula Land and RIL (both are separate Joint Ventures for India and Africa respectively).

  17. There is this nice analysis of SENSEX which can be read on

    I though it was interesting. Hence, thought to share it.