Update On Kirloskar Ferrous Industries Ltd, Target Price 305 By Monarch Networth
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Key MeetingTakeaways Demand Scenario:
* Demand for casting has been strong from tractors. Monsoon seems alright till now and they expect casting demand to remain robust. ~15% YoY growth expected in casting business.
Raw Material pricing:
* Iron ore prices corrected considerably globally. Some stability being seen now. Coking coal is a challenge as prices have been going up for 5-6 months. Reached historical highs and is a matter of concern. Few months’ worth of coking coal is with company but post that they’ll have to buy coal.
* Captive iron ore - 2 mines of company not yet operational; forest clearances pending for both and after that captive will begin. Post clearance, operations will start in couple of months as they are open-cast and already operated mines with approach roads in place.
Cost savings initiatives:
* Company has some comfort in terms of EBITDA/Tonne. Steps are being taken like captive mines to control costs.
* Coke oven and sinter plant offer advantage. Sinter plant will consume coke ~70-80Kg. 70-75% iron ore fines (vs. costlier lumps) used in sinter plant. Company in a hurry to commission this plant
Expansion and Customer acquisition
* Koppal foundries have progressed well. Debottlenecking are almost done. Machine castings interest is good and KFIL is adding machine shops in Solapur and Koppal. Ford engine manufacturing will continue, and sourcing of castings will continue even though they won’t make cars any longer.
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