BUY CALL ADHUNIK METALS .LONG TERM CALL

Target Price: Rs60+Time Outline: 12Months
Reason for Recommendation
1: Profitability of Adhunik Metaliks is very likely to improve considerably owing to its access to mineral resources and its targeted focus on moving up the value chain. The top line and bottom line of the company are on a high growth path going at a CAGR of 75% and 89% over the next two years, leading to an imminent improvement in its top line and bottom lines.

Reason for Recommendation

2: At the CMP, the stock trades at 2.6x its FY2008E and 2.2x its FY2009E earnings of Rs 13.2 and Rs 15.8, respectively. I foresee that the stock will move mo0ve up to a target price of 60 irrespective of the market movement.

Reason for Recommendation

3: The company has carefully planned cost reduction on one hand and value-addition on the other, at all stages of its production cycle. The company's captive power plant of 35MW will save the power cost considerable hence contributing directly to its bottom line.

Reason for Recommendation

4: Also it has procured an allotment of coalmine in Orissa. This will certainly help in holding raw material costs this in turn translates into an integrated value-chain producer with end-to-end capabilities

.Reason for Recommendation

5: Adhunik Metaliks is on track to complete Phase II of its expansion plan; this includes new stainless steel making capacity of 0.12mn TPA. There is going to be a momentous change in the revenue-mix of Adhunik Metaliks towards the higher end value-added rolled segment, from 70 : 30 (billets : rolled) to 30 : 70. Due to this, I expect a considerable improvement in the margins, by around 500 bps. This shift will propel the company into the club of companies like Kalyani Steel, Monet Ispat, MUSCO and Mukand. Sector Notes/Buoyancy: Metals is a sector to be in this year. Conclusion: Strong BuyCompany Website: http://www.adhunikgroup.com