Tata Sponge Iron Ltd Initiating Coverage Report By IndiaNivesh
| Tata Sponge Iron Ltd Initiating Coverage Report By IndiaNivesh | |
| Company: | Tata Sponge Iron Ltd |
| Brokerage: | IndiaNivesh |
| Date of report: | August 3, 2016 |
| Type of Report: | Initiating Coverage |
| Recommendation: | Buy |
| Upside Potential: | 61% |
| Summary: | Engineered to overcome constraints |
| Full Report: | Click here to download the file in pdf format |
| Tags: | BUY, Tata Steel Ltd, TSIL |
| We initiate coverage on Tata Sponge Iron Ltd (TSIL), formerly known as Ipitata Sponge Iron Ltd. The company is a subsidiary of Tata Steel (stake 54.5%), engaged in manufacturing of high grade sponge iron (coal based method) with 390,000 MT Direct Reduced Iron (DRI) production facility. Product quality is finest amongst its peer on back of access to the high quality mine of Tata Steel Ltd. As a result, the company gets higher spread relative to its peers. TSIL also have two captive power production facilities with total capacity of ~26MW. Power is generated through waste heat generated during the sponge iron manufacturing, this minimizes power cost. Strong balance sheet, debt‐free status, and increasing protectionism from government on imported steel look positive. We recommend “BUY” rating on this stock with target price of Rs.930. |
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Main product of Tata Sponge is sponge Iron in which it incurred a loss of 30 plus cr and profit has come from selling power due to which Tata sponge balance sheet is able to show profit during 2015-16 financial year. Sponge sale is loosing money because lucrative market price is not available.Even in June-16 quarter also sponge business incurred loss and power selling covered its losses. I do know when sponge iron prices is going up. Will renovated Kiln produces more quantity of Sponge Iron? I do not know what basis India Nivas projecting upside potential of 61% in share price? Is there likely market price increase for sponge iron in Next quarters?