Usha Martin's (USM) consolidated revenues at Rs6.8bn grew by a subdued 10% despite 34% rise in standalone revenues to Rs5.5bn, on poor performance of global subsidiaries. Operating profit grew by 33% YoY to Rs1.4bn with OPM improving by 370bps on commencement of captive coal. Net profit increased by 31% YoY to Rs419mn. The company is now fully integrated from resources to value added steel products.
VALUATIONS AND RECOMMENDATION
With the completion of capacity expansion and backward integration projects, we expect USM to benefit from volume CAGR of 38% over FY10-FY12E and cost rationalization. We expect EBITDA CAGR of 30% and EPS CAGR of 31% respectively over FY10-FY12E.
At CMP of Rs83, the stock is attractively valued at 3.6x FY12E EV/EBITDA. We recommend 'BUY' on the stock with a target price of Rs120, valuing the company at 5x FY12E EV/EBITDA.