Tata Steel: growth binge

ANALYSTS' CORNER

Enam Securities rates Tata Steel as an 'Outperformer', relative to the sector. The report states that the progress of Tata Steel's future plans at the Jamshedpur facilities are encouraging. The company is targeting five million tonne of crude production for FY06.

The company is right on track in terms of cost saving (by reducing ash content of coal and increasing coal dust injection), value addition (product mix) and volume growth. The expanded g-furnace is operating in full swing.

The company had earlier commissioned its Sinter plant with 2 million tpa capacity. A re-bar mill with 0.6 million capacity has also been commissioned so as to impart focus on branded products for the growing construction segment.

Haldia coke and Orissa port projects are on schedule, whilst South African ferro chrome project is behind schedule. By 2010, the company targets to have 15 million tonne of steel making capacity by way of greenfield projects and acquisitions.

TNPL: interesting product mix

Quantum Securities, in its visit note on Tamil Nadu Newsprint & Papers (TNPL), states that over the years, the company has been changing its product mix.

This has significantly reduced the share of newsprints from 12 per cent of total production in FY03 to four per cent in FY05. Realisations in printing, writing & paper (PWP) are approximately 20 per cent higher than those in newsprints.

While newsprint prices are expected to settle between $ 600-620 per tonne in FY06, prices of PWP are expected to settle at $ 750 per tonne in FY06. A higher contribution from PWP will enable the to company to take advantage of buoyant price realisations in the segment.

Moreover, raw material pressures are expected to ease. Low sugarcane production in FY05 led to a shortage of bagasse, which is used as pulp in paper manufacturing. This pushed up prices in FY05.

However, during the current year, availability pressures have eased following a normal sugarcane crop. Besides, TNPL has tied-up with nine sugar mills and can source up to 14 lakh tonnes of bagasse from these mills.

Carborundum: driving up sales

Quantum Securities, in a visit note on Carborundum Universal, states that with a strong demand growth in the construction, infrastructure, fabrication segment, equipment manufacturing, chemicals & pharmaceuticals and automobile industry, the abrasives division is expected to report a sales growth of 15-20 per cent in FY06.

Margins in the division slipped sharply to 14.4 per cent in FY05 as against 16 per cent in FY04. Pricing pressure in channel sales segment and production issues at the company' s plants brought about a fall in margins.

But margins are expected to bounce back with stabilising prices and drawing in benefits of lean manufacturing practices employed by the company.

In the ceramics division, going forward, the management expects a healthy topline growth with end user industries exhibiting a good growth trend.