Buy Electrosteel Casting: Target Rs 107
Angel Broking has maintained buy rating on Electrosteel Casting with 12 month target price of Rs 107 in their 14 December 2007. “Electrosteel Castings (ECL) is a complete water infrastructure company providing end-to-end solution in water supply & sewerage application systems. We believe that capacity expansion for DI pipes and backward integration into achieving self-sufficiency of key inputs like coking coal and iron ore are the key drivers of growth for ECL going ahead. We expect ECL to record a 30% CAGR in Bottom-line over FY2007-10E. At the CMP of Rs 82, ECL is trading at a P/BV of 1.4x FY2010E BV. However, excluding ECL’s 48.5% investment in Lanco Ferro, the stock is available at P/BV of 1.3x FY2010E BV. We have valued ECL’s 48.5% stake in Lanco Ferro at Rs4/share on current market capitalisation after giving 25% discount. We have valued ECL’s business at Rs 103/share at which it would command a P/BV of 1.8x, which we believe is fair considering peer valuations and the company’s improving business profile. We Initiate Coverage on the stock, with a Buy recommendation and 12-month Target Price of Rs 107 (incld. Lanco Ferro), giving an upside of 30%,” According to Angel Broking report.
