INSUBCONTINENT EXCLUSIVE:
Edelweiss Broking has a buy call on Indian Metals Ferro Alloys with a target price of Rs 733.
The current market price of Indian Metals
Ferro Alloys is Rs 556.50.
Time period given by the brokerage is 'Long Term' when Indian Metals Ferro Alloys price can reach the defined
target.
"Indian Metals Ferro Alloys (IMFA) is the largest ferrochrome producer in India; it has capacity of 275,000 tpa in Odisha with a
captive chrome ore mine and coal-based power plant capacity of 258MW
We believe IMFA would best benefit from the healthy demand for ferrochrome, the current high realisations and the ongoing auctioning of
ferrochrome assets of bankrupt competitors in India
We expect IMFA to maintain an EBIDTA/tonne of Rs 20,000/tonne for FY19–20E compared with Rs 21,000/tonne for 9MFY18 due to its balanced
mix of long-term (70 per cent) and short-term contracts (30 per cent)
Healthy cash flow generation, limited capex, is expected to pare net debt by over Rs 600 crore to just Rs 22 crore by FY20E
We factor in only a marginal volume growth of 2 per cent due to current capacity constraints
We expect IMFA’s EBIDTA and PAT to remain flattish, close to Rs 500 crore and Rs 225 crore, respectively
We recommend a ‘Tactical BUY’ on IMFA with a target price of Rs 733/share, valuing the stock at EV/EBIDTA of 4x on FY20E basis,"
Edelweiss Broking said in a report
