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Electrosteel: The Dark Horse in the Ductile Iron Pipe Industry!Summary ● Electrosteel Castings Limited (ECL) is a prominent Indian company specializing in ductile iron (DI) pipes, fittings, and cast iron (CI) pipes. With a market cap of ₹13,640 Cr, ECL generates 88% of its revenue from India, holding a 28% domestic market share. ● Over the last 3 years, ECL recorded a 29% sales CAGR and 97% profit growth. Its current PE ratio of 15.3 is below the industry average, suggesting undervaluation. ● ECL plans to boost DI pipe capacity to 1 million tons by FY26. The ductile iron pipes industry is poised for growth due to urbanization and government initiatives. ● With its strong market position and robust financials, ECL is well-positioned to capitalize on this opportunity and deliver shareholder value. Investment Advice by Goodluck Capital Buy Electrosteel Casting NSE:ELECTCAST ● Best Buy Range - 210 - 220 ● Target - 275 - 280 ● Potential Return - 28 - 30% ● Approx holding period 8 - 12 months Company Overview Electrosteel Castings Limited produces and supplies ductile iron (DI) pipes, fittings, and accessories, as well as cast iron (CI) pipes, both in India and globally. Their DI pipes and fittings are used in various applications such as water transmission, potable water distribution, industrial water supply, ash-slurry systems, fire-fighting systems, desalination, sewerage, stormwater drainage, and recycling. They also offer ductile iron flange pipes for temporary installations and restrained joint pipes. Additionally, the company supplies metallurgical coke, sinter, sponge iron, ferro silicon, pig iron, and silico manganese ferro alloy, along with cement branded as SPL GOLD. Originally named Dalmia Iron and Steel Ltd, the company was established in 1955 and is headquartered in Kolkata, India. Market Capitalization - ₹ 13,640 Cr. Peer Companies ● Jindal Saw NSE:JINDALSAW - ₹ 22,576 Cr. ● Jai Balaji Industries NSE:JAIBALAJI - ₹ 19,682 Cr. ● Welspun Corp. NSE:WELCORP - ₹ 18,092 Cr. Technical Aspects ● In January 2008, the stock reached an impressive peak of ₹71 but subsequently faced a significant decline. ● The price eventually stabilized around ₹8, leading to an extended period of consolidation. ● During this time, a Rectangle pattern, often referred to as the Darvas Box pattern, took shape. ● After breaking out of this pattern in May 2023, the stock price surged past its previous strong resistance level in October 2023. ● Since then, the stock has maintained its upward momentum and is currently trading just shy of its historical high of ₹226. ● Expectations are high that this momentum will sustain and lead the stock to reach new peaks in the near future. Relative Strength ● The chart clearly illustrates that Electrosteel Castings has greatly outperformed the Nifty Smallcap 250 index, boasting an impressive annual return of 219%, which is truly an outstanding achievement. Revenue Break-up ● Product wise break-up ➖ The primary source of the company's revenue comes from the production of Ductile Iron pipes and fittings, which alone makes up about 86% of its total income. Additionally, the company manufactures Cast Iron pipes, contributing roughly 2.8% to the overall revenue. ● Location wise break-up ➖ The company generates nearly 88% of its revenue from India, where it holds a 28% share of the domestic market. The remaining 12% of its income is sourced from international markets. Revenue & Profit Analysis ● Over the last three years, this stock has recorded an impressive compounded annual growth rate (CAGR) of 29% in sales. Additionally, the total profit growth during this period has been remarkable, achieving a staggering 97% CAGR. ● Furthermore, the company has successfully maintained an operating profit margin of 16%, a notable increase from 10% in FY24. ● For the fiscal year 2024, earnings per share (EPS) have surged from 5.31 in fiscal year 2023 to an impressive 11.97. Currently, the EPS for the past twelve months is at 14.69. ● A closer look at the quarterly results shows that the company reached a record high in quarterly sales, reporting 2,012 crore in June, up from 2,004 crore in the March quarter. This figure significantly exceeds last year's June quarter sales of 1,685 crore. Product Demand Analysis ● Inventory Turnover Ratio ➖ Current Inventory Turnover - 1.82 ➖ Inventory Turnover 3 years ago - 1.70 ➖ These figures indicate that product demand has risen over the past three years. Valuation ● P/E Ratio ➖ The company's current price-to-earnings (PE) ratio is 15.3, which is below its one-year median PE of 15.8. Compared to the industry average PE of 36.76, this suggests that the stock is significantly undervalued at present. ● P/B Ratio ➖ The stock seems to be undervalued, with a price-to-book (PB) ratio of 2.67, particularly when compared with the industry average PB ratio of 5.52. ● Intrinsic Value ➖ Electrosteel Castings is presently priced at ₹220, which is significantly below its intrinsic value of ₹258, suggesting that the stock is currently undervalued. ● Peg Ratio ➖ A PEG ratio of 0.47 suggests that the stock is undervalued relative to its expected earnings growth. Cash Flow Analysis ● The operating cash flow has experienced an impressive leap, climbing to 806 crore from 452 crore in FY23. This remarkable growth highlights the company's robust financial health. Furthermore, the current CFO/PAT ratio stands at 0.9 of its five-year average, reflecting the company's exceptional capability in turning profits into cash efficiently. Debt Analysis ➖ The company's existing debt stands at Rs. 2,332 crore, a figure that is notably low when juxtaposed with its market capitalization of Rs. 13,655 crore. ➖ With a debt-to-equity ratio of merely 0.46, it is clear that the debt burden is manageable for a capital-intensive enterprise, allowing the company ample room to pursue further financing if required. ➖ Examining the balance sheet shows a remarkable decrease in debt, which has fallen from Rs. 2,667 crore last year to the present Rs. 2,332 crore. Capex Plans ➖ The ongoing capital expenditure stands at around ₹700 crores and is on track, with ₹410 crores already utilized by the end of Q1 FY25. ➖ There are ambitious plans to boost the total manufacturing capacity of DI pipes to 1 million tons by FY26. ➖ Additionally, land is being acquired in Odisha for a new Greenfield project focused on DI pipes and fittings. Shareholding Pattern ➖ The promoters currently hold about 46.22% of the company, up from 44.08% in December 2023, indicating growth during the March quarter. ➖ Foreign Institutional Investors (FIIs) have been consistently increasing their stakes, with total holdings reaching 21.16% as of June 2024, a significant rise from 14.93% in June 2023. On a quarter-to-quarter basis, ➖ Domestic Institutional Investors (DIIs) have raised their holdings to 0.44% from 0.36% in the March quarter; however, this represents a notable decline from the 1.68% recorded in the same period last year. Ductile Iron Pipes Industry Outlook ● Advantages of choosing DI pipes over PVC pipes ➖ According to the analysis of the ductile iron pipes market in India, these pipes are made up of approximately 90% recycled materials and are fully recyclable. ➖ Additionally, using ductile iron pipes instead of PVC can lead to an energy consumption reduction of around 40%. ● Ductile Iron Pipes Market Growth ➖ Ductile iron pipes play a crucial role in public infrastructure, serving irrigation, drinking water distribution, sewage, and wastewater systems. ➖ With India's economic growth, the rise of smart cities and projects like Bharatmala Priyojana and the Narmada Valley Development Project is driving the demand for extensive pipeline networks, boosting the ductile iron pipes market. ➖ Factors such as increasing urbanization and government initiatives like Jal Jeevan Mission, AMRUT, and Smart City Mission, focused on delivering drinking water to households, are further fueling this demand. Conclusion ● After thoroughly examining both the technical and fundamental factors, we have concluded that Electrosteel Castings is well-positioned for substantial growth, driven by the increasing market demand for ductile iron pipes, which is likely to positively impact its share price as well.
Editors' picks
NSE:ELECTCASTLong
by GoodluckCapital
4
NATCO PHARMA: A Multiyear Breakout Set to Double Your Investment Investment Advice by Goodluck Capital (SEBI Registered) Buy Natco Pharma NSE:NATCOPHARM Buy Range- 1210 - 1220 Target- 1950 - 1960 Potential Return- 60-62% Approx investment period 12 - 14 months TECHNICAL ANALYSIS NSE:NATCOPHARM (1) Back in 2017, Natco Pharma encountered several rejections around the 1,050 level, leading to a subsequent decline. (2) The 500 level has emerged as a crucial support point, allowing the stock to bounce back from this threshold. (3) Although the stock made an attempt to surpass its trendline resistance in July 2021, it ultimately fell short, resulting in another correction before finding support at the 500 level once more. (4) Since March 2023, the stock has been on an upward trajectory, successfully breaking through the resistance level in July 2024. Following this significant multi-year breakout , there is a strong expectation that the stock will remain above the breakout zone, paving the way for a robust upward rally. ● ENTRY & EXIT LEVELS - Look for the best buy levels between 1,210 and 1,220, as this is also the breakout level. However, if the stock begins to consolidate at that level and subsequently breaks out, the upper boundary of this consolidation could present another lucrative entry point. - Based on the chart analysis, it appears that there is a 60% upside potential for this stock, hovering around the 1,950-1,960 level. Moreover, there is a possibility that the stock may surpass this level. FUNDAMENTAL ANALYSIS NSE:NATCOPHARM ● PE RATIO - The stock's current PE stands at 16.9, slightly higher than the 1-year median PE of 14.2 but lower than the 5-year median PE of 26.3. - With an industry PE of 36.6, the stock appears undervalued. ● PB RATIO - The present PB ratio for this stock stands at 3.96, indicating a slightly high valuation but not reaching overvalued territory. ● DEBT TO EQUITY RATIO - The company's debt to equity ratio of 0.06 indicates that it is nearly debt-free. ● PROFIT & LOSS ANALYSIS - Over the last three years, this stock has experienced a remarkable compounded annual sales growth rate of 25%. - The cumulative profit increase over the past three years has been an impressive 49%, indicating a strong upward trend. - The profit margin has seen a significant boost, rising to 44% from 35% YoY. - The EPS growth for FY24 is remarkable, soaring to 77.5 compared to just 39 in FY23. ● CASH FLOW ANALYSIS - There is a substantial increase in operating cash flow, jumping by almost 43% to 1,212 crore from 849 crore in FY23. ● SHAREHOLDING PATTERN - The promoters have consistently held their stakes at 49.71% over the past three quarters. - Over the last four quarters, FIIs have been steadily increasing their investments, in contrast to DIIs who have been offloading their stakes.
Editors' picks
NSE:NATCOPHARMLong
by GoodluckCapital
5
Technical Analysis with Elliott Wave InsightToday, we're exploring Ward Wizard Innovations & Mobility Ltd., an Indian electric vehicle manufacturer, with an intriguing twist of Elliott Wave theory for market insights. Before we dive into the waves, here's some background: Ward Wizard Innovations & Mobility Limited is a publicly-held electric vehicle manufacturing company based in India. It's dedicated to producing eco-friendly electric scooters and vehicles. Not just in India, but its impact extends to countries like Uganda and Nepal. Now, back to the chart and Elliott waves: Recently, the stock witnessed a substantial decline from January 2022 to July 2023, followed by a period of consolidation. Going back to its origins in May 2015 up to July 2021, we identify a significant wave ((1)), marking a robust upward trend. This was followed by wave ((2)), an Expanded Flat correction (A)-(B)-(C) in blue. Wave ((2)) concluded near 161.8% of wave (A) as wave (C) of ((2)). Now, the exciting part: The best possibility is that we're currently experiencing a significant wave ((3)), known for bringing about robust upward momentum. This wave holds the potential to surpass previous all-time highs. Elliott Wave theory is a captivating tool, helping us understand market psychology and forecast future price movements based on wave patterns. Remember, there's a crucial detail: We've set an invalidation level at 33.20, representing the low of July 2023. If prices drop below this level, it might indicate a different wave scenario. Conclusion: Our analysis hints at the potential for a strong bullish wave ((3)). Markets are full of surprises, and risk management is your best companion on this journey. I am not Sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses. Most investors treat trading as a hobby because they have a full-time job doing something else. However, If you treat trading like a business, it will pay you like a business. If you treat like a hobby, hobbies don't pay, they cost you...! Hope this post is helpful to community Thanks RK💕 Disclaimer and Risk Warning. The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
Editors' picks
BSE:WARDINMOBILong
by RK_Chaarts
25
#HSCL - INVESTMENT PICKABOUT Himadri Speciality Chemical is primarily engaged in the manufacturing of carbon materials and chemicals. It is the No.1 coal pitch manufacturer in India and is the only company to manufacture advanced carbon material in India. It is also the largest player in Naphthalene and SNF in India. KEY POINTS Product Portfolio It manufactures a wide range of carbon materials and chemicals. Its products include coal tar pitch, carbon black, specialty carbon black (SCB) Naphthalene, Advanced carbon material, SNF (Sulphonated Naphthalene Formaldehyde), and specialty oils. It has transformed its portfolio from low-value products to high-valued products over the years for higher margins. Manufacturing Capabilities Capacity :- Coal Tar Distillation - 5,00,000 MTPA Carbon Black - 120,000 MTPA Specialty Carbon Black - 60,000 MTPA SNF - 68,000 MTPA The company owns 8 manufacturing facilities in India out of which 4 are located in West Bengal. It also owns a manufacturing unit in China. It recently started manufacturing specialty carbon black after expansion in FY20. It also planning an advanced carbon project of 20,000 MTPA at a project cost of ~300 crores. Its coal tar distillation plant in West Bengal is the largest in India with a capacity of 500,000 MTPA (metric tonnes) that produces various grades of coal pitch and also produces naphthalene for further processing of SNF. Sales Volume The company recorded a sales volume of ~320,000 MTPA of carbon materials and chemicals in FY20. Geographical Revenue Breakup Presently, the company earns ~92% of its revenues from sales within India and the rest 8% from sales outside India. Industrial Exposure The company is exposed to various industries namely steel, aluminum, automotive, plastics, rubber, and infrastructure development. Clientele Base Its client base includes Vedanta, Hindalco, Balco, Nalco, Alcoa, graphite India, MRF, apollo tyres, CEAT, Goodyear, Pidilite, Fosroc, BASF, and others. PERSONALLY EXPECTING 300__500% ROI NSE:HSCL
NSE:HSCLLong
by timetravellerfromfut
1