Buy Graphite India; target of Rs 117: Angel Broking

Nov. 22, 2010 - Angel Broking is bullish on Graphite India and has recommended buy rating on the stock with a target of Rs 117 in its October 29, 2010 research report.
"Graphite India (GIL) posted in-line top-line, which increased 16.0% yoy to Rs 324 crore (Rs 279 crore) on the back of the 48% yoy increase in sales Volumes for 2QFY2011. OPM for the quarter came in strong at 26.1% as graphite electrode prices stabilised during the quarter. With the global steel industry showing signs of revival, the company is well poised to benefit from the capacity expansion that it is currently undertaking. At current levels, the stock is trading at 1.2x and 1.0x FY2011E and FY2012E book value, respectively."
"The robust volumes growth of 48% yoy and 34% sequentially drove top-line up to Rs 324 crore. Even though realisations fell, graphite electrode prices were more stable during the quarter compared to the previous few quarters. As a result of high volumes, OPM was strong at 26.1% qoq. However, yoy OPM fell by 1,322bp owing to low-cost inventory in 2QFY2010. The company reported high other income, which was off-set by the one-time voluntary retirement scheme (VRS) charge of Rs 12.7cr at the Bangalore plant. Consequently, PAT came in at Rs 49.2 crore. Adjusting for the onetime expense, PAT was Rs 62 crore."
"Demand for graphite electrodes is expected to remain strong on the back of higher steel production across the globe. The company's capacity expansion is expected to lend a boost to its future growth prospects. Overall, we expect GIL to register a CAGR of 19.1% in top-line and 8.2% in profit over FY2010-12. At current levels, the stock is trading at 1.2x and 1.0x FY2011E and FY2012E P/BV, respectively. We maintain a Buy on the stock, with a target price of Rs 117," says Angel Broking research report.