With almost all commodities in a ‘once in a life-time’ bull run, the Indian metal sector has had a pretty good time. But government-imposed price curbs and the slowdown in global economic growth are playing spoilsport for the sector.
SELL
National Aluminium: Unfortunately for Nalco, the bull run in other commodities hasn’t quite materialised in aluminium. Simultaneously, operating margin for the nine-month period ended December ’07 has taken a hit of over 10% because of lower sales realisation and higher power cost. Moreover, with a P/E of 15.7 and PE/BV of 3.7, Nalco is one stock that you may do well to exit.
Ispat Industries : A highly volatile operating margin makes Ispat Industries highly vulnerable to an increase in raw material costs. At the same time, a very high debt-equity ratio of 4.84, very low interest coverage ratio of 1 and the fact that it has been making losses for the past two years make Ispat Industries a sell.
BUY
Godawari Power and Ispat: With a very strong operating profit margin of over 16%, which is relatively higher compared to its peers, this may well be the best pick in this sector. Moreover, with strong possibilities of it getting an iron-ore mining lease in the near future, which will further improve its operating margin to about 30%, Godawari Power is a buy.
SELL
National Aluminium: Unfortunately for Nalco, the bull run in other commodities hasn’t quite materialised in aluminium. Simultaneously, operating margin for the nine-month period ended December ’07 has taken a hit of over 10% because of lower sales realisation and higher power cost. Moreover, with a P/E of 15.7 and PE/BV of 3.7, Nalco is one stock that you may do well to exit.
Ispat Industries : A highly volatile operating margin makes Ispat Industries highly vulnerable to an increase in raw material costs. At the same time, a very high debt-equity ratio of 4.84, very low interest coverage ratio of 1 and the fact that it has been making losses for the past two years make Ispat Industries a sell.
BUY
Godawari Power and Ispat: With a very strong operating profit margin of over 16%, which is relatively higher compared to its peers, this may well be the best pick in this sector. Moreover, with strong possibilities of it getting an iron-ore mining lease in the near future, which will further improve its operating margin to about 30%, Godawari Power is a buy.
Resources – Indiaearning.com
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