NELCAST ( STOCK FOR SHORT TERM GAINS)
Nelcast is one of India’s largest suppliers of ductile iron and grey iron castings ranging from 0.5 kg to 260 kg. Total capacity is 1.50 lakh tonnes.
Parts required for various applications in automobiles such as engine, transmission, suspension, axle, brake and steering are manufactured. The tractor industry sources components for its requirement of various housings as well as engine, transmission and axle components. Other users include the railways and the pipe fittings industries.
From catering to the commercial vehicle (CV) industry since 1985 and the tractor industry since 1988, there has been diversified into other industries to fulfill their casting needs. The products cater to the global automotive, tractor, construction, mining, railways and general engineering sectors. Customers include some of the leading global companies in these sectors.
Clients include original equipment manufacturers Motors, Ashok Leyland, Tafe, Eicher Tractors, Mahindra & Mahindra, Volvo-Eicher Commercial Vehicles, Same Tractors, Escorts Tractors, Sonalika Tractors, Daimler India, Ashok Leyland John Deere and Caterpillar. Tier I auto ancillary users are Automotive Axles, American Axles, Dana, Rane Madras, Rane-TRW, ZF India and Simpson & Co. and export customers include Meritor and ZF Industries.
Spheroidal graphite iron castings, which are increasingly preferred by user industries, constitute over 75% of the production. These castings are versatile, value-additive and have higher ductility and tensile strength compared with grey iron castings. There is effort to increase revenues from the Railways and the industrial castings segment. Products are being developed for construction and earth-moving equipment players. This will also help boost exports. The focus is also on increasing the share of machined components to boost realizations and help margin expansions.
There is continuous thrust on developing new products for applications in CVs and tractors. More than 100 new components were developed for these segments in the fiscal ended March 2015 (FY 2015). Several new products were developed for heavy trucks, army and construction and mining applications.
Production facilities at Gudur in Andhra Pradesh have been upgraded. This will enable attracting new customers, both from the domestic and exports markets. The modernization will enable catering to the newer generation of vehicles and supply of superior quality of products. A foray was made into the global SUV market last fiscal.
Many research activities have been undertaken for component weight reduction, core cost reduction, core weight reduction, process designing and process improvement. Riding on the R&D division, the market was expanded and competitive position strengthened through improved products for new markets.
The product development lead time was reduced and product quality improved due to advancement of simulation capabilities. Through R&D, surface finish of the products was improved, thereby obtaining new global business opportunities.
R&D will be used to focus on expanding the market for automotive applications and conversion of components from other processes and materials to iron castings. New products such as differential carriers and axle housings will be launched for overseas customers.
Also, new materials will be developed for innovative next-generation products such as austempered ductile iron applications and new production processes to create competitive advantage in a certain range of components.
Sales grew 1% to Rs 156.21 crore and the operating profit margins (OPM) jumped 470 basis points (bps) to 12.8%, taking up operating profit (OP) 58% to Rs 20.06 crore in the fourth quarter ended September 2015 over a year ago. Profit after tax (Pat) was up 70% to Rs 10.42 crore.
Sales inclined 4% to Rs 297.83 crore and the OPM spurted 350 bps to 11.6%, boosting OP 49% to Rs 34.53 crore in the six months ended September 2015 over a year ago. Pat surged 71% to Rs 17.55 crore.
An expected improvement in demand for tractors from the second half of current fiscal, continued healthy growth in sales of medium and heavy CVs and de-risking efforts by entering manufacture of castings for off-road vehicles hold promise for long-term prospects.
We expect Nelcast to register net sales of Rs 568.32 crore and Pat of Rs 35.24 crore in FY 2017. EPS works out to Rs 4.1. The scrip was trading around Rs 64 on 14 December 2015.
Nelcast is one of India’s largest suppliers of ductile iron and grey iron castings ranging from 0.5 kg to 260 kg. Total capacity is 1.50 lakh tonnes.
Parts required for various applications in automobiles such as engine, transmission, suspension, axle, brake and steering are manufactured. The tractor industry sources components for its requirement of various housings as well as engine, transmission and axle components. Other users include the railways and the pipe fittings industries.
From catering to the commercial vehicle (CV) industry since 1985 and the tractor industry since 1988, there has been diversified into other industries to fulfill their casting needs. The products cater to the global automotive, tractor, construction, mining, railways and general engineering sectors. Customers include some of the leading global companies in these sectors.
Clients include original equipment manufacturers Motors, Ashok Leyland, Tafe, Eicher Tractors, Mahindra & Mahindra, Volvo-Eicher Commercial Vehicles, Same Tractors, Escorts Tractors, Sonalika Tractors, Daimler India, Ashok Leyland John Deere and Caterpillar. Tier I auto ancillary users are Automotive Axles, American Axles, Dana, Rane Madras, Rane-TRW, ZF India and Simpson & Co. and export customers include Meritor and ZF Industries.
Spheroidal graphite iron castings, which are increasingly preferred by user industries, constitute over 75% of the production. These castings are versatile, value-additive and have higher ductility and tensile strength compared with grey iron castings. There is effort to increase revenues from the Railways and the industrial castings segment. Products are being developed for construction and earth-moving equipment players. This will also help boost exports. The focus is also on increasing the share of machined components to boost realizations and help margin expansions.
There is continuous thrust on developing new products for applications in CVs and tractors. More than 100 new components were developed for these segments in the fiscal ended March 2015 (FY 2015). Several new products were developed for heavy trucks, army and construction and mining applications.
Production facilities at Gudur in Andhra Pradesh have been upgraded. This will enable attracting new customers, both from the domestic and exports markets. The modernization will enable catering to the newer generation of vehicles and supply of superior quality of products. A foray was made into the global SUV market last fiscal.
Many research activities have been undertaken for component weight reduction, core cost reduction, core weight reduction, process designing and process improvement. Riding on the R&D division, the market was expanded and competitive position strengthened through improved products for new markets.
The product development lead time was reduced and product quality improved due to advancement of simulation capabilities. Through R&D, surface finish of the products was improved, thereby obtaining new global business opportunities.
R&D will be used to focus on expanding the market for automotive applications and conversion of components from other processes and materials to iron castings. New products such as differential carriers and axle housings will be launched for overseas customers.
Also, new materials will be developed for innovative next-generation products such as austempered ductile iron applications and new production processes to create competitive advantage in a certain range of components.
Sales grew 1% to Rs 156.21 crore and the operating profit margins (OPM) jumped 470 basis points (bps) to 12.8%, taking up operating profit (OP) 58% to Rs 20.06 crore in the fourth quarter ended September 2015 over a year ago. Profit after tax (Pat) was up 70% to Rs 10.42 crore.
Sales inclined 4% to Rs 297.83 crore and the OPM spurted 350 bps to 11.6%, boosting OP 49% to Rs 34.53 crore in the six months ended September 2015 over a year ago. Pat surged 71% to Rs 17.55 crore.
An expected improvement in demand for tractors from the second half of current fiscal, continued healthy growth in sales of medium and heavy CVs and de-risking efforts by entering manufacture of castings for off-road vehicles hold promise for long-term prospects.
We expect Nelcast to register net sales of Rs 568.32 crore and Pat of Rs 35.24 crore in FY 2017. EPS works out to Rs 4.1. The scrip was trading around Rs 64 on 14 December 2015.
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