Srikalahasthi pipes formally known as Lanco Industries Limited (LIL) was incorporated on November 1, 1991 by Lanco Group of Companies to manufacture Pig Iron using Korf (German) technology and Cement. The unit is located at Rachagunneri Village on Tirupathi - Srikalahasthi road which is about 30 kms. from Tirupathi and 10 kms. from Srikalahasthi. The installed capacity of Pig Iron was 90,000 TPA and with similar capacity 90,000 TPA for cement. The operation of the cement unit of the Company was suspended for various reasons and the unit was reengineered for producing a different product mix having potential in south India.
As a measure of forward integration project for adding value to the Pig Iron manufactured by the Company, LIL floated another company named Lanco Kalahasthi Castings Limited (LKCL) on March 4, 1997 to manufacture iron castings and spun pipes in the same campus of the Company with an annual capacity of 40,000 TPA and 35,700 TPA respectively. Accordingly, LIL had an arrangement with LKCL for supply of molten iron and Pig Iron to LKCL, being a value added product, as such iron pipes manufactured by LKCL offered better returns.
Areas of Operation
Lanco is in the business of manufacturing pipes for conveying safe drinking water and other fluids for domestic and overseas markets.
For sustained growth we intend to venture into related businesses in the area of :
- 1. Suitable horizontal and vertical integration projects.
- 2. Turnkey projects.
- 3. Engineering & consultancy
- 4. Build-own-operate-transfer projects and diversify into new areas of business including infrastructure related projects.
- refrenece: http://www.electrosteel.com/group-companies/lanco.aspx
Outlook :
Srikalahathi pipes continue showing growth in q-o-q results from fy13. and in last 3 years it gave blockbuster numbers. div. yield also increases yoy. and investment stood at 147cr. in recent year. the ratios are as follow,
Return on equity: 43.95%
Return on capital employed: 33.26%
Interest Coverage: ₹ 6.48
Net Profit latest quarter: ₹ 42.97 Cr.
NPM latest quarter: 15.39%
NPM last year: 13.86%.
Expansion of plant was completed in Sept. quarter in current financial year, so full capacity advantage will be coming in second half. so second half will be good and it will be post EPS above 15 from third quarter. so, from next year it will posted annual EPS above 60. and the company should be in the list of top 100 Indian companies by EPS. that times it should be on the cusp of re-rating and after completion of expansion management will start reduce debt. this point should become game changer in future. the another plus point for buy the stock at current market price is stock consolidated from last one year earnings up by 61% and stock up only 10%, so, sharp move from this level is excepted any time and in next 2-3 years it will be stable in 4 digits.
Buy srikalahasthi pipes in rannge of 300-330 for the first target of 1000 in LT.
My views are personal do your own homework before invest.
bookef profit in ashok leyland@110. 