Anand Rathi has a BUY recommendation on Kalyani Steels with the following views,
Kalyani steels is a part of well known Kalyani Group, it is engaged in manufacturing of - Pig iron, alloy & special steels and Rolled products. The company has huge capacity of pig iron of 6,70,000. For blooms and rolled products it has capacity of 1,35,065 and 2,50,000 capacity. Looking to strong demand from auto/auto ancilliary sectors, the utilization levels will zoom up, resulting in to better earnings.
The strong recovery in - Auto, Auto ancillary, forging & casting sectors; to continue to boost the demand for company's products. Almost all the major auto & auto component makers are its clients. The internal consumption within group companies is also significant. Company is fully integrated low cost producer of special, carbon & alloy steel, with captive iron ore mines and JV for production of Met coke.
Looking to the trend in Q-1, we expect that company will perform much better in current year and may report EPS of over Rs 25/-, thus discounting FY'11 EPS by just 5X. We think a large integrated Kalyani group company should attract much better discounting of at least 10X, which gives 12 month target of Rs 250/-. BUY.
