Opinion on - GOODLUCK STEEL TUBES LTD

Low PE good growth.

 

Debt is too heavy about 300 cr
Equity capital is 4.40 cr
Mcap is about 219 cr

 

Debt is indeed high but operating profit appears to comfortably cover interest payments. Also good margin expansion in the last couple of quarters. Given the single digit PE multiple, my sense is that the market is valuing it as a commodity steel manufacturer. In its 2015 AR, the company has said it won't do anymore capex in its low margin businesses but instead will invest in Autos, Railways, and Solar businesses. Need to track whether margin expansion is sustainable. If it is, then the stock is due for a rerating.

This might not be a 15-20 year long term story, but could be a very profitable 3-4 year cyclical play.