Cen­tury Ex­tru­sions Ltd

Money Times - - Bull’s Eye -

(BSE Code: 500083) (CMP: Rs.7.78) (FV: Re.1) By Pratit Nayan Pa­tel

We had rec­om­mended this stock at Rs.6.78 on 27 Au­gust 2018, where-after it zoomed to Rs.9 in a very short span of time! The stock has fallen now due to the over­all cor­rec­tion in the mar­kets but it has not bro­ken its sup­port level of Rs.6. It bounced back from the lower lev­els last week and looks good again on tech­ni­cal and fun­da­men­tals ba­sis.

Com­pany Back­ground: Es­tab­lished in 1991, Kolkata based Cen­tury Ex­tru­sions Ltd (CEL) is a large pure play alu­minium ex­tru­sion man­u­fac­turer. It has pan In­dia pres­ence with re­gional mar­ket­ing of­fices in Ban­ga­lore, Chen­nai, Coim­bat­ore, Delhi, Hy­der­abad, Kan­pur, Kolkata and Mum­bai. Its pro­duc­tion fa­cil­ity at Kharag­pur in West Ben­gal is lo­cated close to lead­ing alu­minium man­u­fac­tur­ers in In­dia. With an ex­pe­ri­ence of over 25 years, it has de­vel­oped a com­pre­hen­sive un­der­stand­ing of the alu­minium and alu­minium ex­tru­sions mar­ket. ‘Cen­tury’ is a re­puted brand with low his­tor­i­cal as­set cost and a strong cus­tomer base of over 500 re­puted clients. It pos­sesses in-house fa­cil­i­ties for dye man­u­fac­tur­ing, melt­ing and cast­ing of bil­lets and its ex­tru­sions man­u­fac­tur­ing fa­cil­ity has three press lines with an ag­gre­gate ca­pac­ity of 15,000 TPA. Its ex­tru­sion presses have been man­u­fac­tured by renowned equip­ment man­u­fac­tur­ers like UBE In­dus­tries (Ja­pan), Granco Clarke (USA) and Sid­dharth In­dus­tries (In­dia).

CEL has an in­ven­tory of 4,500+ dyes that man­u­fac­ture 3,000+ pro­files. Its ex­tru­sions, which range from 1xxx to 7xxx se­ries, find ap­pli­ca­tion in var­i­ous in­dus­tries such as ar­chi­tec­ture, gen­eral engi­neer­ing, de­fence, rail­ways, road trans­port ve­hi­cles, etc. Also, it has the req­ui­site in­fra­struc­ture to sup­ply ex­truded and cold drawn round and hexag­o­nal bars for var­i­ous engi­neer­ing ap­pli­ca­tions. It has the set up to sup­ply ex­truded and cold drawn rods and wires in coil form as well. It has also ven­tured into the power trans­mis­sion & dis­tri­bu­tion (T&D) hard­ware busi­ness, which is do­ing ex­tremely well.

Fi­nan­cials: With an eq­uity cap­i­tal of Rs.8 crore and re­serves of Rs.38.14 crore, CEL’s share book value works out to Rs.5.4 and its P/BV stands at just 1.45x. The pro­mot­ers hold 52.04% of the eq­uity cap­i­tal, which leaves 47.96% stake with the in­vest­ing pub­lic.

Per­for­mance Re­view: For FY18, CEL re­ported 175% higher PAT of Rs.3.7 crore on 20% higher sales of Rs.242.7 crore and an EPS of Re.0.5. For Q2FY19, it re­ported 127% higher PAT of Rs.1.9 crore on 28% higher sales of Rs.67.3 crore and an EPS of Re.0.2. Dur­ing H1FY19, it re­ported 180% higher PAT of Rs.3.4 crore on 10% higher sales of Rs.127.2 crore and an

EPS of Re.0.4.

In­dus­try Overview: The non-fer­rous met­als in­dus­try plays a cru­cial role in the In­dian econ­omy since it meets the re­quire­ments of var­i­ous key in­dus­tries like engi­neer­ing, elec­tri­cal and elec­tron­ics, in­fra­struc­ture, au­to­mo­bile and au­to­mo­bile com­po­nents, pack­ag­ing etc. The In­dian Alu­minium in­dus­try is highly con­cen­trated with the top five com­pa­nies con­sti­tut­ing ma­jor­ity of the coun­try’s pro­duc­tion. In­dia’s per capita con­sump­tion of alu­minum is very low (<1 kg) com­pared to other coun­tries like USA and Europe (25-30 kgs), Ja­pan (15 kgs), Tai­wan (10 kgs) and China (3 kgs). How­ever, the de­mand for alu­minum is on the rise and alu­minum pro­duc­tion in the past five years has grown sig­nif­i­cantly. Var­i­ous steps are be­ing taken to pro­mote the alu­minum sec­tor. Alu­minium ex­tru­sions are 100% re­cy­clable and emit no sig­nif­i­cant haz­ardous gasses dur­ing pro­cess­ing. Higher us­age in green ini­tia­tives is driv­ing the growth of the alu­minum ex­tru­sion mar­ket. The global alu­minum ex­tru­sion mar­ket is fore­cast to grow at the rate of ~7%. Alu­minium ex­tru­sion is re­plac­ing steel in au­to­mo­biles and trans­port. Hence, the growth of the au­to­mo­bile in­dus­try will also drive the growth of this mar­ket. Be­sides, end-user in­dus­tries such as power, real es­tate, trans­porta­tion, engi­neer­ing, agri­cul­ture, so­lar en­ergy and de­fence also have a promis­ing fu­ture.

Con­clu­sion: At the CMP, the CEL share trades at a P/E of 10x. Based on its per­for­mance pa­ram­e­ters, the stock looks quite at­trac­tive at the cur­rent level. In­vestors can ac­cu­mu­late the stock with a stop loss of Rs.5.75 for a price tar­get of Rs.13-15 in the next 12-15 months. The stock’s 52-week high/ low is Rs.9.6/ Rs.4.59 and its mar­ket cap stands at Rs.62.24 crore.

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