Century Extrusions Ltd
(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.