Pig iron manufacturer, Tata Metaliks, may be ready for a run up

Tata Metaliks (TML), promoted by Tata Steel, has been engaged in the production of pig iron since 1994. Pig iron is used in the manufacture of rolling mill rolls, automobile engine blocks, motor and generator housings, gears, railways and machine tools.

In October 2007, TML signed a joint venture agreement with Japanese companies Kubota Corporation and Metal One Corporation to set up Tata Metaliks Kubota Pipes, to manufacture ductile iron pipes. The company, headquartered in Kolkata, has a capacity to make 110,000tpa (tonnes per annum) of ductile iron pipes at its facility within the TML pig iron plant in Kharagpur, West Bengal. TML’s other manufacturing facility is at Redi in Maharashtra.

TML has acquired captive iron ore, manganese, limestone and dolomite mines towards achieving raw material security. TML has been granted a prospecting licence for iron ore mines at Dongarpal in Maharashtra. The company is also pursuing a sinter plant at Kharagpur, 120,000tpa capacity non-recovery type coke ovens at Redi and Kharagpur and a coal dust injection plant at Kharagpur. Other projects are captive power plants at Kharagpur and Redi that will utilise flue gases from the coke ovens.

The company recently signed a memorandum of understanding with the Karnataka government for an integrated steel project of 3mtpa at Haveri. It has received approval for land, power and water supply for the project, which will be implemented in association with Tata Steel and is pursuing the allotment of iron mines.

The company produced 506,301million tonnes (MT) of hot metal in FY09-10 compared to 386,685MT in the previous year. In the quarter to June 2010 it reported a profit of Rs10.30 crore against a loss of Rs14.93 crore in the previous corresponding quarter. Net sales surged 48.12%, to Rs273.21 crore from Rs184.45 crore. Average sales growth in the past three quarters has been a high 54%. The drawback for TML is that margins are low (10%), so a slight dip in sales could result in profits falling, as was the case in 2009. Buy the stock now (current market price Rs138.95) for a rally at least up to Rs210.— Moneylife Digital Team

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