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Wednesday, February 17, 2010

Hot Pick : Facor Alloys Ltd. Bse Code: 532656

Facor Alloys Ltd. is one of India's largest producers and exporters of Ferro Alloys, an essential ingredient for manufacture of Steel and Stainless Steel. It exports to several countries like Korea, Japan, Italy, Netherlands, USA, Turkey, China and Taiwan. Post trifurcation of the Facor group into 3 independent entities in 2004 under a demerger scheme, FACOR has the capacity to produce 65,000 TPA of Charge Chrome / Ferro Chrome and 2,50,000 TPA of Chrome Ore at its Plant in Orissa. It has also established a mining complex at Bhadrak in Orissa for the mining of Chrome Ore, the main raw material for the production of Charge Chrome/ Ferro Chrome. FACOR has been accredited with ISO 9001:2000 standard, which coupled with other control measures adopted by the Company, enables it to maintain its world wide status as a producer of quality products.

The stock has seen highs of around Rs.21 before the crash happened in 2008. At current price of just around 4.9, the stock is available at a good discount to its Book Value of nearly 5.86. The company is also looking at acquisitions of Chrome Ore mines abroad to expand its capacity. Once the acquisition is made, the stock can see a complete re-rating. At current valuations the stock looks very cheap and the future looks good for this stock.

Cheers!

25 comments:

Conrad said...

Hi Superstar,
Your picks are really good. Can you spare sometime on on the following stocks.
1. Aarti Industries
2. Ultramarine Pigments
3. Varun Shipping.

Thanks
A Wellwisher

Superstar said...

Hi Conrad,
Had a look at all three of your stocks. The order in which you've put them matches exactly with my preference, Aarti Ind being the best out of the three on valuations parameter. But all three of them are currently at their crucial support zones, as far as their stock price is concerned. Barring any news related to these stocks, it depends on the overall market conditions whether they go up from the current levels or give up 10-20% more before bouncing back. Keep watching the markets carefully and take decisions accordingly.

Cheers!

Vivek said...

Dear Naveen,

Thanks for your picks. Regarding Facor Alloys and GHCL, how much time do you think it will take before these 2 realize their true potential. I know no one can predict 100%, but still what does your research say?

Thanks,
Vivek

Conrad said...

Thanks Superstar. Frankly speaking I didn't expect your reply :). Thanks once again.

Vivek said...

Dear Superstar,

Another question. This time about your old pick Micro Tech. It has come down quite a lot (and I missed the bus last time when you recommended it at 150). Do you think I can invest in it now? My only doubt is why is it continuously going down. Even today when the market was up, it went down by 2.5%. Please advise.

Thanks,
Vivek

Superstar said...

Hi Vivek,

Both Facor Alloys and GHCL are good for long term investment at current levels. You can't time the markets but when you choose good stocks with good business potential at reasonable valuations, the chances are very high that you will make good money in the long run. Two cases in point, Aurobindo Pharma & JK Lakshmi Cement. I had recommended both these stocks based on their fundamentals just before the notorious crash of 2008 happened. Even though the timing wasn't right to buy those stocks at that time and they initially went down after my call due to the overall market scenario, they eventually bounced back very sharply. And those who held on to these stocks even in the bad times were rewarded with multibagger returns in the last one year.

As regards, Micro Tech, it ran up very sharply from my recommended level of 150 to 215 in a matter of days, so a technical correction was bound to happen, considering the overall market has been going down in the last few weeks. If it is available at 150 again for some reason, then one can pick it up again.

Cheers!

Vivek said...

Thanks for the reply Superstar! You are doing a good job helping out others with investment ideas. Keep up the good work.

Thanks,
Vivek

Conrad said...

Hi Superstar,
Can you plz provide your inputs as to why Sterling Biotech has taken such a beating. What is your recommendation on the stock at this level?

Thanks & Regards
Conrad

amit said...

the details regards to chrome ore is for ferro alloys and not facor alloys as mentioned by you.

though facor remains an awesome buy as its is virtually a debt free company with cash in hand of 50crs +

so that like 2.5 cash in hand + add on every year new cash flow and a EPS of 3 for FY 11 consideringthe stability in the steel mkts.

Vivek said...

Dear Superstar,

Micro Tech has again started its up move. What do you suggest? Is it a stock for long term or should I book profits once it reaches close to 200?

Thanks,
Vivek

Capt Anil Sharma said...

Dear SuperStar , Many thanks for the recommendation of facor Alloy . Today it went up 15% , hopefully it will be Multibagger.Regards .Capt Anil .Thanks for being generous and kind enough to share your picks

Capt Anil Sharma said...

Thanks Superstar , For this tip.What is the next target for this Facor Alloy . My regards to you.Capt Anil Sharma

Superstar said...

Hi Conrad, Sterling Bio has been steadily declining because it's been posting lower EPS and both it's Operating Profit Margin & Net Profit Margin have been falling over the last year. Technically it can bounce provided the overall market supports it.

Hi Amit, thanks for your comment. I agree that Facor Alloys is a great buy at current levels. If FY 2011 EPS is going to be 3, then the price can easily go above 15.

Hi Vivek, Micro Tech is a good stock to have in your portfolio for the long term. But in the short term it needs to consolidate a little around current levels, specially when the markets are currently in a trading range.

Hi Capt. Anil, thanks for your kind words. As an investment, Facor Alloys should be held till it reaches double figures at least. Technically, the first target is 7.70 in the short term. If it is able to post an EPS of 3 for FY2011, then giving it a conservative PE of 5, the stock price can easily go above 15. So it's a strong buy currently.

Cheers!

Vini said...

Hi,
I have bought Facor Alloys at Rs.6.13 . will it still increase from this price?

Thanks and Regards

Capt Anil Sharma said...

Dear SuperStar , Many thanks for your recommendation. Please note that tehelka has come with a very negetive report on Prithvee . I came out of Prithvee. BTW I have invested in Concurrent Infra , I beliveve this is multibagger . My kind regards.I am in Facor now Big time by my standars. Regadrs.Capt Anil

lalita said...

sir,
i have purchased micro tech @ 208, whether can i get profit, please do specify time frame.
regards
lalita

Vivek said...

Dear Superstar,

Is there any news which is generally in favour of the ferro alloys industry? The reason I am asking this is there is another company Ferro alloys, which also started moving up around the same time as facor alloys and infact ferro alloys has moved up much more than facor.

Thanks,
Vivek

Superstar said...

Hi Lalita,
Micro Tech is a SCREAMING BUY at current levels of around 175. It is quoting at a PE of just 3 at this price and the fair PE for this stock should not be less than 10. So you can do your math, this means that Micro Tech has the potential to rise 3 times from current levels. This is an investment grade stock, buy and forget for one year at least.

Hi Vini,

In the long term Facor Alloys can rise still more from here. But it has risen quite sharply from 4.9 to 6.3 in just one week so some amount of profit booking can be expected.

Hi Vivek,
Ferro Alloys is also the part of the same group as Facor. I heard they are coming up with a power plant this year, which is why the stock has rallied. Ya, and I know Ferro has moved much more than Facor. It is possible that the upcoming power plant may be more beneficial to Ferro than Facor...that's why it outperformed.

Hi Capt. Anil,

Prithvi has got embroiled in legal hassles, which is why the negative report. It has given a good bounce from the lows of 57 to 74 recently, where it might have been prudent to exit for the time being. This is a high risk stock and the stock price will depend upon the outcome of the court cases and their settlement.

Cheers!

Ratan Koduru said...

thanks for the info. I profited from the microtech suggestion. Bought more than 100 stocks :)

Also what are your views on SEL manufacturing? I have been looking at this stock for a while and would love some some expert opinion.

Ratan Koduru

Capt Anil Sharma said...

Dear Superstar , Facor is showing upper movement .IS there a chance of this moving up in current uptrend or some waiting is expected? My regards.Capt Anil

Investor73 said...

Dear superstar,

Thanks for the super tip on FACOR:

The company is further investing in captive power unit through a special purpose vehicle. The company has an added advantage that it has a tie up with Ferro alloys, which has the mines and thus it indirectly gets the raw material at a discount in comparison to market price.

FACOR can be bought because the commodity cycle bottomed out recently, and thus backward integration, proposed capacity expansion, and better realizations on account of price hike shall help the company post better results. It's a long term buy at current levels.

Cheers and god bles..

Sachin Shah said...

hi.

what your view about CHANNEL GUIDE ?

udit said...

hi pls comment on subex.What are the future prospects for this telecomit firm and what are the achievable tagets for this stock in near future

Capt Anil Sharma said...

Dear Superstar , Please inform if the Buzz is more for Ferro Alloy than Facor due to Mittal news.Will the targt for 15 still hold good for Facor?Kind regards.Capt Anil

Superstar said...

Hi Ratan, Capt. Anil, Investor73, Sachin, Udit.

Facor has exceeded my first target of 7.7 today by registering a high of 8.15 today. The buzz is of course more in Ferro Alloys in which Arcelor Mittal is rumored to be buying a stake. 15 was supposed to be a LONG TERM target for this stock, but you never know how the mkt will behave.

Right now the best buy according to me is SEL Manufacturing.

Cheers!