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Centrum Broking
Tata Metaliks (Buy)
CMP: ₹665
Target: ₹890
Tata Metaliks (TML) delivered subdued performance in Q1 as the positive impact of strong volumes from the Ductile Iron (DI) segment was negated by sharp spike in other expenses led by
i) a one-off expense related to shutdown of MBF-1; and
ii) an excise duty incidence due to pig iron inventory accumulation. We continue to maintain our positive view on TML as its DI pipe business boasts of an industry leading cost structure, solid demand drivers and strong entry barriers. With the recent commissioning of growth-accretive and cost-efficient projects offering quick paybacks, TML is set to take the next leap in profitability and deliver EBITDA/PAT CAGR of 28 per cent/ 38 per cent over FY17-19E.
Despite the recent strong up move, we see valuations attractive with reasonable scope for a re-rating.
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