Electrosteel Casting Limited cmp Rs167-168 FV(Rs1) : Diwali Pick 2024

Electro steel casting Ltd is my Diwali pick 2024 for my blog followers. The Company is engaged in the business of manufacturing Ductile Iron (DI) Pipes, Ductile Iron Fittings (DIF) and Cast Iron (CI) Pipes. The Company is the first to set up a Ductile Iron Pipe Plant in India. Today, it is India’s leading pipeline solution provider. It has a strong brand presence around the Globe. Since 1994, the Company has maintained its edge over its competitors. Owing to the high reliability and durability of its products, the Company has always remained the distinct choice for water engineers and domain experts in Ductile Iron Pipes and Fittings. Application : 1.Raw & clear water transmission distribution network of potable water : Benificiery of growing urbanisation. 2. Sewage & waste water distribution 3.Industrial effluent disposal Industry Outlook India is witnessing an unprecedented era of economic progress and India today is competing with developed economies in the world and its growth is expected to hover around 7–8 per cent for next few years. Regarded as one of the fastest for growing major economy, India is thriving hard to achieve the ambition of becoming an $5 trillion economy. A steady growth in Gross Domestic Product has been witnessed for more than two decades, which is continuing. India, home to 16 percent of the world’s population, has only 2.5 percent of the worlds land area and 4 percent of the world’s water resources at its disposal. This is also declining in terms of quantity and quality. Drinking water was once considered safe in India, but today providing nearly 1.40 billion inhabitants with access to safe drinking water is a big challenge. The alarming rate of depleting groundwater sources and rapidly polluting surface water requires immediate and focused attention by all stake holders. The demand for water has been increasing at a high pace in the past few decades. The sustained economic growth has triggered more industrialisation and rapid urbanization all over India. With only around 31% of India’s population currently urbanized, along with high population density, India’s urbanization trends have scope to significantly accelerate and likely to be around 40% by 2030. The rural India is still remaining largely uncovered with piped water network Alongside only about one–third of the Indian homes are connected with a sewerage network. This staggering problem has pushed the Govt. of India to initiate the largest ever water supply initiative anywhere in the world, the ‘Jal Jeevan Mission’, with an aim to connect all the rural house hold with piped water. At the same time AMRUT mission has been initiated to augment the urban water supply and sewage disposal. To cater to this growing need, the Indian pipe and fittings market is growing at a fast rate for more than a decade now. Under the ‘Jal Jeevan Mission’, India has undertaken a very ambitious initiative and is already geared up for major expansion in water supply and distribution infrastructure in all the states. The total outlay of AMRUT 2.0 is Rs. 2.99 lakh crores. Further growth in pipe demand is expected from AMRUT 2.0 in the coming years. Demand for Pipes Sewerage At present only about 30% of the waste water generated in India gets treated. Meanwhile with rapid urbanisation, the sewage generation in India has witnessed an increasing trend over the past few years registering a CAGR of about 4.7%. The government has been instrumental in introducing a plethora of programmes and schemes over the past four–five years. The main aim of these programmes is to improve the wastewater and sewerage infrastructure in the country. Currently there are more than 1200 projects envisaged under different government programmes such as AMRUT 2.0, Swachh Bharat Mission, Namami Gange Programme and Smart Cities Mission. For sewerage force main DI pipe is the best choice. Even for gravity collection network, use of DI pipes with High Alumina cement lining is increasing. Demand for Water in Irrigation Precipitation in the form of rain and snowfall provide over 4,000 trillion liters of fresh water to India. Most of this freshwater, returns to the ocean via the large rivers flowing across the subcontinent. A portion of this water is absorbed by the soil and is stored in underground aquifers. A much smaller percentage is stored in inland water bodies both natural (lakes and ponds) and man–made (tanks and reservoirs). Of the 1,869 trillion litres of water reserves, only an estimated 1,122 trillion litres can be exploited due to topographic constraints and distribution effects. With a very limited storage capacity, farming activity in India is mainly sustained by irrigation. We need more water for irrigation to feed the growing population. Traditionally, irrigation in India has been mainly canal based. However, now there is a growing acceptance of piped irrigation to minimise the transmission loss due to percolation and evaporation and to avoid the complication of land acquisition. In many states a good number of Piped Irrigation Systems are coming up and other states are following. This has opened good scope for use of pipes and fittings in the irrigation sector in the last few years and the same is expected to grow. Financials

At current market cap of approximately 10500 croresit generated net profits of approximately 740 crores on FY 23-24 AT AN EPS of Rs 12.30. ROCE 19.0% & ROE 19.3%. Net Debt equity ration 0.27:1. Consistent & rising dividend paying record since last 4 yrs.Last year dividend of Rs 1.40

Investment rationae 1.continuous improvement in net debt to equity ration reduced from 0.50 to 0.27 in last 3 yrs. 2.PAT Margin percent has increased to 9.8% 3.Capacity expansion planned from existing 7.48Lakh MT to 10 Lakh MT by 2026 through internal accurals.Already spent 440 crores. 4.Expansion to contribute to revenue growth & profitability in next 2 yrs. 5.H2 Results are impressive YOY revenue growth of 4.3% 3564 crores(reported) at an EPS of 5.89 against last year H1 EPS of Rs 4.45 resulting in 32% growth in PAT . 6.Indian DI pipe mkt is expected to grow at CAGR 12.5% over next 5-7 yrs offers great oppurtunity for ECL to grow. 7.Benificiery of Jal Jeevan Mission.

At and eStimated FY24-25 EPS OF Rs 15 stock is availaible at very attractive valuations looking at growth potentiel and a unique thematic product line stock has potentiel to create new highs.