27th August 2009 

Uttam Galva Steels Ltd.

Market Performer ; BUY

Company Info INVESTMENT RATIONALE

CMP(Rs) 90.50
Sales decline on the back of fall in realization: For the quarter under review,
Target Price (Rs) 110
the Net Sales/ Income from operations of UttaM Galva stood at Rs 1073.3 crore,
Sector Steel which was lower by 4% when compared to previous quarter. However the
52 week H/L 96.4 /22.6 company has registered a growth of 35% y-o-y.
BSE Code 513216
Operating performance: EBITDA of Rs.130.5 crores increase of 11% y-o-y and
NSE Code UTTAMSTL 5% q-o-q. The company has successfully reduced its other expenses by 16% q-o-
Face Value(RS) 10 q and a decline of 4% y-o-y, it has also reduced its raw material purchase by
Market Cap(Rs) 4395.22 39% q-o-q. Due to fall in the costs the EBITDA of the company has improved.
PAT of the company stood at Rs.42.49 crore a decline of 11% y-o-y and 13% q-
o-q.
Price Performance
Margins: The company for the Q1FY10 has posted an operating margin of 12.2%
% 1m 3m 1yr
as compared to 11.2% in the last quarter of FY09. However the operating
Absolute 1.6% 111.0% 126.5% margins have declined y-o-y mainly because of increase in the raw material cost
Relative y-o-y.
33.2% 81.8% 108.0%
to Sensex
Key Developments
Shareholding Pattern (%)
• Company plans to invest Rs 400 crore in enhancing capacity of its
Promoters 41 service centre and adding new product mix over next one year. The
FII 39 investments would be largely funded through a mix of internal accruals
and debt.
Institutions 0
• The company is also exploring opportunities for setting up second
Public & Others 20 captive power plant. It is currently in the process of installing a 60 MW
captive power plant near its steel plant, which will entail investments of
Rs 300 crore.
• Uttam Galva has installed capacity of one million tonne of cold rolled and
galvanised steel at Khopoli. Last year, the company produced 600,000
tonne of steel and is targeting 800,000 tonne this fiscal. Almost half of
the output will be exported to over 40 countries

Valuations

At current price of Rs 90.5 the stock is trading at P/E of 9.06 x TTM EPS of
Rs.9.98 and it is trading at TTM EV/EBITDA of 2.88x.

We recommend a “BUY” on the stock with a 12 month target price of

Rs.110.

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