Friday, November 15, 2013

IFGL REFRACTORIES LTD- IMPROVING BUSINESS .........











At a time ,one of my old recommendations -Vesuvius India (Recommendation Link HERE) - recorded its 52 week high price ,recommending another stock from the same sector. IFGL refractories is the flagship company of SK Bajoria group.Company manufacturing Continuous Casting Refractories and Special grade Refractories which find applications in steel industry. Refractory ,in general ,means  a class of materials which are produced from nonmetallic minerals and possess capability to withstand heat and pressure .Now IFGL has grown as  an Indian multinational with  manufacturing facilities located in Brazil, China, Czech Republic, Germany, India, UK and USA. Krosaki HarimaCorporation Japan ,a subsidiary of world’s second largest steel maker NipponSteel Corporation holding about 15 % stake in IFGL.Growing through acquisitions is the strategy of IFGL and it reached the current stage through many acquisitions in the past.In 2005 ,IFGL acquired Monocon group of UK with factories in Brazil,China,USA and UK.In 2006, Goricon Group came to the fold of IFGL .In 2008 ,IFGL acquired Hofmann Ceramic GMBH of Germany with manufacturing facilities in Germany ,USA and Czech Republic.In 2010 ,Ohio ( USA) based EL Ceramics LLC added with it .With all these acquisitions company grown as one of the worlds largest manufacturer of refractories.These acquisitions broadened company’s product portfolio which now consist of Isostatic Refractories,Tube Changer Systems,Cast Products and Monolithics,Slide Gate refractories,Slide gate systems and Foundry Ceramics.In addition to these products for steel industry ,IFGL manufacturing Bio Ceramics for dental,orthopedic and ophthalmic applications.

                                                                                  Fate of refractory companies closely related with the growth of steel industry.Now steel industry world around showing some earlier signs of revival.As a global player ,IFGL is expected to  get immense benefit from this revival.Its technical collaboration and equity participation with one of the world leaders also helping the company to adopt latest technology in manufacturing process. A major portion of company’s income is from exports and the currency valuation of currency is also positive for it.

                                                                                 IFGL having a good balance sheet too.Even after these series of acquisitions ,company ‘s debt equity ratio is just 0.55 .For the latest September quarter,on a consolidated basis company reported a Sales of Rs.201 Cr v/s Rs.181 Cr .Net profit improved sharply from Rs.4 Cr to Rs.19 Cr. Half year EPS is Rs.9.70 which is more than the full year figure of last year.Company having an uninterrupted dividend paying record for the past four years.Promoters holding more than 70 % stake( NIL pledged)  in the company  and another 7 % is held by large investors.At a time the steel industry is showing revival ,I expect IFGL will report its best ever performance in this  full year.Even after improvement in its stock price in recent times ,@ CMP Rs.49 ,IFGL is currently trading @ one  year forward P/E of just 3 .Considering industry’s improving prospects,stabilization of production from its newly built plant at  Kandla SEZ and out performance of company in its financials, I don’t expect any scope for deep correction,hence recommending a BUY @ CMP Rs.49 .Stock listed both in NSE and BSE.

Link to Company website HERE

Disc: I have vested interest in IFGL 

22 comments :

  1. Can we have your result view on Arrow coated Products?

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  2. VP ji, Please explain why JSW Energy crashed to this level and any hope for recovery?

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    Replies
    1. Not JSW alone all power cos share price came down drastically in past few years.As of now ,there is no formula to fix the tariff based on raw material cost ie,coal,naphtha ..etc.Hence when there is a rise in the prices of these items on a continuous basis ,power cos are facing serious issues .Till there is a formula as in the case of petrol price is implemented ,power cos may report only poor numbers and we can't expect any significant re rating in their stock price.

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  3. what do you think about acrysil?in current correction is it goodbuy at 120rs!

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  4. Sir, do you think IFGL can compete with Vesuvius and Orient Refractories (now has German parent) in terms of technology?

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    1. Technology is not an issue ,as I mentioned above It is backed by one of the world leaders technical and financial support.

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  5. Hi VP, I wanted to bring your attention to 2 of our old posts. Vimal OIl & Sequent Scientific. The loan amt is increasing for Vimal Oil & the profits are decreasing for Sequent. I have some investments in these. Would like to have you feedback on the results of both of these stocks for the quarter and your opinion on further accumulating these.

    Regards

    Neil

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  6. Vimal oil promoters are bringing more funds to the company by subscribing 36,00,000 Equity Shares on Preferential Basis.

    In the case of Sequent ,as you are aware this company is owned by the same promoters of Strides Arcolab.Due to delay in govt decisions ,Stride's plan to sell its Agila unit delayed for the past many months.Now it is expected to complete in the fourth quarter of this FY.I believe ,once this sale process completed, promoters will pay much attention to the company.In recent times Sequent decided to start a joint venture with shasun and divest its veterinary division to a subsidiary.As far as my understanding ,for the past one year or so health of Its Chairman and Managing Director Mr K. R. Ravishankar, was in a critical stage and he was not in a position to handle the day to day operations of the company .Only recently company changed him from this post.I believe ,all of these decisions which happened in last two months are signs of the starting of some speedy actions in the company.

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  7. Dear VP,

    Do you track Photoquip? They have launched Corvi branded LED lights in India. Check the youtube link http://www.youtube.com/watch?v=wSiLIlvGY6k Howver stock is in PCA

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    Replies
    1. I am not sure about the scalability of their products.

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  8. Sir what is your take on Tree house education and which stocks do you suggest for 10-15 year horizon?

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    1. Tree house is HOLD @ CMP.I will not recommend any stock as a blind buy for 10-15 years period even blue chips , especially at a time business dynamics is changing very fast .Periodic review is necessary for any stock.

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  9. Sir,
    your view on Orient Bell ceramics results. The stock moved very quickly to 60.

    thanks

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    Replies
    1. Prospects of business will change only with a revival in construction/real estate sector.May take some more time.

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  10. Sir,
    do you think ESAB is also in the same field and your view on it sir?

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    1. ESAB is not producing the same products ,they are in welding electrodes and allied business.

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  11. Dear V P sir,
    what is your view on HBL power systems latest results good, intrest also decrese,I heared upcoming quarter willbe good
    please read this below article and comment on it

    http://www.livemint.com/Companies/BBpoDaOMT9fV0PudhFJGZM/Citigroupbacked-battery-maker-HBL-Power-Systems-in-retail-f.html

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    Replies
    1. I believe , entry in retail sector will be very tough for a company like HBL.Prefer to stick with Amara Raja

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  12. after ur recommendation stock is trading at 65( high for this year) its great sir........................... still how much potential is there???????

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  13. EXCELLENT WORK U R DOING SIR....oTHER PEOPLE ARE CHARGING SO MUCH TO GIVE USELESS TIPS... I WANT TO KNOW UR NAME SIR... IT WILL GIVE MORE RECOGNITION TO UR WORK:)

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