Wire
power…
Usha Martin (UML) is an integrated, specialty steel maker with a niche product mix
comprising steel wire rods, wires, ropes and strands. The company is nearing
completion of its Rs 2100-crore capex programme. This is expected to take its
steelmaking capacity to 0.7 MT by FY10E end. The company enjoys the benefits of
complete backward and forward integration and maintains its value-added product
share above 50% in its overall product mix, which leads to healthy margins in
both up and down cycles. We expect earnings CAGR of 24.9% over FY09-11E.
The
company has a presence in the niche segment of value-added products like wires,
wire ropes and strands where product realisations and EBITDA per tonne are very
robust. The company realised an EBITDA/tonne of ~Rs 12000/tonne in Q2FY10. This
is expected to improve further towards ~Rs 15000/tonne, going forward.
UML’s
Rs 2100-crore capex programme is nearing completion. This, in turn, would
increase its rolled steel making capacity to 7 lakh tonne by the end of FY10E
and to 1 million tonne by the end of FY11E. Also, the company aims to maintain
product and market diversification with value-added steel share of >50% on
the expanded capacity together with complete backward integration.
UML
reported higher consolidated sales volume of ~91,300 tonne in Q2FY10E, up ~18%
QoQ, aided by higher volumes from the wire rods and wire ropes segment. We
expect sales volumes to keep improving on a sequential basis and reach a total
of ~120,000 tonne per quarter by Q4FY10E, which would result in higher earnings.
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