N V Chandrachoodamani
Chandrachoodamani started his capital market career in mid 2000s with Equity Intelligence India and then worked with several capital market Intermediaries in various roles over the last 15 years. Most of his career experience has been in equity research and PMS. Most recently, he was with MOAT, a PMS firm. He is a graduate in mathematics, a post graduate in finance, and holds a CFP certification. LinkedIn|Twitter
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12 thoughts on “Stock recommendation: A consolidation play in the commodity space”
Team,
What is the current reco on this stock ? Is it still buy ? Or is there a change ?
It may be useful for the stocks team to provide a 6 monthly review of the recommendation in a short summary form. Just a suggestion.
Thanks
Shankar
The current price for this stock is not reflected correctly in the Stock Recommendation section. Can that please be updated.
Is there any timeline for the merger with Tata Metaliks? Sept Quarter Profits seem to have taken a hit due to rising input costs…
Welcome your query sir
Will look into the stock price updation issue, thanks for pointing out
On the results, the input cost impact was much higher than expected. Net profit has halved Vs preceding quarter after adjusting for one time expense of 15cr
Steel Cos are expecting some cool off in input cost prices in subsequent quarters. Sharp rise in coking coal prices has been the problem. So, there should be profit recovery in coming quarters but not to the extent of peak profit seen in Q4FY21/Q1FY22
On the bright side, Co has further reduced debt by 636 crore, the debt is only 684 crore now
On merger, while the timeline for completion has been earlier planned for December 2021, it is getting delayed with respect to approval process from SEBI. Hope to get more clarity on the timeline by next quarter, the process is still on
Thank you
Thank you for your prompt response and analysis. Debt being reduced to just 684 crore is great news and this could become debt free in like 2 Quarters…Hopefully merger goes through soon…Your comments help in soothing some nerves as the stock price took a bit of a hit after the results were announced 😀
Thanks for analysis. Couple of questions :
1. As per my understanding , commodity space like steel actually have their run already and not much steam left in it. I may be wrong but thats what I read. In light of that, how is this stock positioned.
2. On ticker tape, it says as default probability for this stock in next 12 months. What is your take on it.
Appreciate your query sir
If you remember, there was a time in 2007 when Tata Steel was bidding for Corus at mid-night with prices increasing every 15 minutes. Come 2020, Tata, JSW, Mittal were buying companies from NCLT at their replacement cost. This gives a perspective of cycles and they are generally long.
Prices need not rise continuously but their sustainability for a longer period is key for companies to perform, de-leverage (early stage of cycle) and then go for expansion (generally at later stage of cycle). The direction looks positive for prices as we understand by listening to industry veterans and other reports. The company is an integrated steel maker that can withstand price corrections by virtue of its high margins
On ticker tape, we don’t want know how it assess such probabilities. The Debt:Equity ratio for the Co.at the end of FY21 is just 0.5 and the out-standing LT debt is nearly the same as EBIDTA for one year, ie. FY21.
You can also use our stock screeners to compare with other steel companies by choosing the “sector – Steel” and by adding basic filters on growth and valuation such as latest revenue, PAT and Debt equity ratio. PE and Price to book value are there by default.
Good article, very informative. Can you clarify why the share price dipped from a high of Rs 1,000 plus in Jan 2018 to Rs 400 levels by end 2019?
Thanks for your query sir
It is a good observation. Though a part of correction from 2018 was due to stock market trend reversal, the correction got deeper pursuant to acquisition and capital infusion exercises. The Co.’s EBIDTA came lower than interest cost in FY2020, post acquisition, and it carried good amount of debt as well.
But, with the turn of steel cycle upwards, the whole picture has changed and the Co has repaid half of debt in FY21. Now the focus shifts to growth and profitability.
How does this stock compare to JSLHISAR? If that a better proposition?
Thanks for your query sir
There is a corporate action going on where JSLHISAR will get merged back in to JSL. Post that JSL will be the only listed entity.
This recommendation is a bit too late. It has been recommended as far back as 8 months by others and appreciate d quite a lot since then. It was 300 plus then. Meaningful recos must come good time
Hello sir,
Appreciate your concern.
However, It’s only post Oct – Nov 2020 that more visibility emerged on commodity cycle and earnings picked up.
Tata Steel infused capital in the Co in April 2019 at Rs.500/- per share and one needs time to see what the company’s plans were.
Going by its growth prospects, quality and valuation parameters, it still look attractively priced and hence our recommendation to accumulate the stock. At this point, yes, a rear view mirror opinion is easy but we need to have conviction when we give a call. And we take into account whether there is steam left.
Thanks, Mani
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