S. ALAM COLD ROLLED STEELS LIMITED (UPDATE)

S. ALAM COLD ROLLED STEELS LIMITED (UPDATE)
DSE: SALAMCRST
BLOOMBERG: SACRS:BD
Company Overview
Company Fundamentals
S. Alam Cold Rolled Steels Limited (SACRSL) was incorporated in
2000 and commenced its commercial production in 2004. The
Company is involved in manufacturing and selling of
high quality Cold Rolled Steels Strips (CR Strips) in the form of
coils and sheets. The products of the company are C.R Coil,
Baby Coil, C.R Cut Piece, Off Gauge, Trimming, GP/CI sheets etc.
ensuring the backward linkage of the Steel Industries of
Galvanizing, Corrugated and Automobile industry.
Market Cap (BDT mn)
Sales of CR Coil remained as the core revenue source having
78.3% contribution in 2013-14. However, Sales of Scrap, CI
Sheet and GP sheet contributed 11.8%, 9.4%, 0.5% in the
revenue during the same year.
The company’s annual installed production capacity for C.R.
Coil plant and NOF plant is 1,20,000 MT and 72,000 MT
respectively. In 2013, the firm utilized 43.0% and 7.7% of its
production capacity of C.R. Coil plant and NOF plant
respectively. The firm imports its raw material from Japan,
Korea, Netherlands, Romania, Russia, India, Taiwan, China etc.
As per 2013 annual report, the only subsidiary of the Company
named S. Alam Power Generation Ltd. (70%) – a 17 MW captive
power plant – is expected to start operation in May 2014. The
primary objective of this subsidiary is to provide power supply
constantly to their various projects and if there is any surplus
then sell it to the National Grid. SACRSL also has 11 associate
companies conducting various line of business.
The Company enlisted in the DSE and the CSE in 2006. Around
48.5% of shares of the company are held by Sponsors whereas
42.48% and 9.02% of shares are held by General and
Institutions investors respectively.
Industry Overview
2,282.2
0.1%
Market weight
98.4
No. of Share Outstanding (in mn)
Free-float Shares
51.5%
Paid-up Capital (BDT mn)
983.7
4.5
3-month Average Turnover (BDT mn)
-34.6%
3-month Return
23.2
Current Price (BDT)
22.5-42.4
52-week price range (BDT)
Sector’s Forward P/E
20.8
2011-12
Financial Information (BDT mn):
3,702
Sales
Operating Profit
656
2012-13
2013-14
2014-15
3,778
3,355
4,693
537
398
407
(Q1 Ann)
335
196
95
154
10,802
10,425
13,395
15,234
250
2,049
2,135
2,092
2,097
2,148
2,116
2,154
15/0
13/0
15/0
-/-
Gross Profit
19.2%
15.6%
13.3%
11.2%
Operating Profit
17.7%
14.2%
11.9%
8.7%
Pretax Profit
12.6%
7.2%
4.1%
4.5%
8.8%
5.0%
2.9%
3.3%
22.0%
2.0%
-11.2%
39.9%
Gross Profit
4.0%
-17.4%
-24.1%
17.9%
Operating Profit
2.1%
-18.2%
-25.9%
2.3%
Net Profit
9.4%
-41.5%
-51.3%
61.4%
ROA
3.7%
1.8%
0.8%
1.1%
ROE
16.3%
9.0%
4.5%
7.2%
Debt Ratio
44.5%
46.2%
48.0%
43.3%
Debt-Equity
229.5%
224.2%
303.7%
305.9%
2.8
1.8
1.5
1.8
16.7
20.2
36.7
14.8
Price/BV
1.2
1.2
1.2
1.2
EPS (BDT)
3.3
1.9
1.0
1.6
DPS (BDT)
1.5
1.3
1.5
--
20.0
20.4
20.1
21.9
Profit After Tax
Assets
Long Term Debt
Equity
Dividend C/B)%
Margin:
Net Profit
Growth:
Auto Re-Rolling and Steel Mills industry of Bangladesh is
directly related to the growth of construction and housing
sector particularly in semi-urban and rural areas. Infrastructural
development is also dependent on CI sheets as it is used for
roofing, side and peripheral fencing. Around 30% of households
in rural and urban areas are constructed with GP/CI sheet
materials. As supportive material, GP/CI sheets are widely used
in other civil constructions as well.
At Present, total demand for CI sheet in the country stands
around 600-700 thousand MT for both residential and
Commercial needs. Around 65% of total demand is satisfied by
local manufacturers. Some portion is imported by small local
traders. But still, there is a shortage to meet local demand of CI
sheet in the country.
Large 5-6 companies mainly dominate the market. These firms
are – Abul Khair Steel Mills, PHP Steels Mills, KY Steel Mills, S.
Alam Cold Rolled Steels Ltd. Galco Steels and TK steel Mills. In
2013-14 Budget, 5% regulatory duty was exempted leaving 25%
Custom Duty on import of CR Coil.
Sales
Profitability:
Leverage:
Int. Coverage
Valuation:
Price/Earnings
NAVPS (BDT)
1
09 April, 2015
Investment Positives



The Company imported its entire raw materials therefore
it is exposed to foreign exchange risk.
The capacity utilization ratio of the company dropped
substantially from 71.05% in 2012-13 to 42.99% in 201314. This large drop depicts the lessening of the production
efficiency of the company.
Restated EPS (BDT)
3.1
3.3
1.9
1.6
1.0
2010-11
2011-12
100
80
60
40
20
0
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Source: DSE Website & ILSL Research
Pricing Based on Relative Valuation:
Investment Negatives

Last 5 Year Price Movement (BDT)
120
The Company will enjoy uninterrupted power supply from
its subsidiary- S. Alam Power Generation Ltd. This plant
will reduce the production cost of the company and
increase efficiency. It is expected that the power plant will
start its operation in May 2015.
The Company’s operation is directly linked with the
Government’s ADP implementation. Therefore, it may
enjoy improvement in its earnings in the next quarter
(April-June) since ADP implementation rate is relatively
higher in the April-June quarter.
2012-13
2013-14
2014-15 (Q1
Ann.)
Peer Group* Forward P/E
Market Forward P/E
Multiple
14.1
Value (BDT)
22.1
15.9
24.9
* BSRMSTEEL, RSRMSTEEL, GPHISPAT and APOLOISPAT are considered as peer
group
Concluding Remark
S. Alam Cold Rolled Steels Ltd., a concern of S. Alam Group, has
an established brand name in the market. It operates in a
medium large scale industry which has some seasonality effect.
The Company has reported outstanding sales growth Q1 mostly
due to poor performance in the same period of the last year. As
on date, the company’s RSI (15) and MFI (15) are 23.43 and
15.46 respectively.
Source: Annual Report, S. Alam Website, the Financial Express, the Daily Star, The Company’s
concerned officials and ILSL Research
Source: Annual Reports & ILSL Research
ILSL Research Team:
Name
Rezwana Nasreen
Md. Tanvir Islam
Towhidul Islam
Mohammed Asrarul Haque
Designation
Head of Research
Sr. Research Analyst
Research Analyst
Jr. Research Analyst
For any Queries: [email protected]
Disclaimer: This document has been prepared by International Leasing Securities Limited (ILSL) for information only of its clients on the basis of the publicly
available information in the market and own research. This document has been prepared for information purpose only and does not solicit any action based
on the material contained herein and should not be construed as an offer or solicitation to buy or sell or subscribe to any security. Neither ILSL nor any of its
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used in the documents are genuine, accurate, complete, authentic and correct. However all reasonable care has been taken to ensure the accuracy of the
contents of this document. ILSL will not take any responsibility for any decisions made by investors based on the information herein.
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09 April, 2015