About The Company
The Company was incorporated on the 29th 1986 and was subsequently converted into a public limited company on 5th July, 1993. The Company was involved in trading activity after incorporation. The main object of the company is to manufacture and sell Low Ash Metallurgical Coke. However after taking up the project to manufacture Low Ash Metallurgical Coke with a capacity of one lac TPA, the company discontinued the trading activities. Gujarat NRE Coke, country’s largest independent producer of met coke.The promoters have hiked their holding in the company by 4.8% through creeping acquisition route during April-October 2008 and it now stands increased at over 45%. It is also going ahead with its plans for the rights issue with differential voting rights (DVR) to the existing shareholders of the company in the ratio of 1 DVR share for 450 existing equity shares at a price of Rs 1,000 per DVR share.
About The Financials
The company has posted results for the second quarter ended 30th September 2008. The second quarter continues to reflect the boom it had in the prices of coke and coal but the coming months would not start reflecting the fall in their prices.For Q2FY09, total Income has shown a jump of 4.86 times from Rs.102.07 crores to Rs.496.05 crores, resulting in a surge of 8.19 times in the Net Profit, from Rs.12.55 crores to Rs.102.75 crores. This performance has been a foregone conclusion but what is important now is the coming months.
Like the fall in prices in almost all commodities, right across the board, coke prices have also seen a meltdown. With demand from steel and power units coming down, and globally also prices coming down, realizations for the company too have gone down. Coke prices have gone down by 21% from $700 a tonne in July-August to $500 levels now. And the fall in prices is expected to continue. This means that in the coming months, margins will come pressure and the earnings it has posted for Q2 would remain as history.
Positive cues in the stock
The main positive cue in the stock is that the company has sheer size and have its operations in Australia. The company’s present coke production capacity of 1.006 million tonne is being expanded in a phased manner to 1.254 million tonne and 2.254 million by 31st March 2009 and 31st December 2010. It is also the only company owning and operating coking coal mines in Australia and both mines are now in production. During the current fiscal the ROM coking coal production from its two mines is expected to be in excess of 1million tonne and brownfield developments are underway to ramp up the production to beyond 7 million tones by 2012/13.
About The Stock
The stock is sound and a very good investment opportunity.
Disclaimer : I Do not have any personal holding in this stock.My clients may have some position.