Srikalahasti Pipes- A Bright Future ahead!

Srikalahasthi Pipes Limited, formerly LANCO Industries Ltd., is an India-based company, engaged in the manufacture and supply of Ductile Iron Pipe. It is a Public Utility Services company catering to the needs of Water Infrastructure Development. The Company also produces Low Ash Metallurgical Coke and Power for captive consumption in its integrated complex. It also manufactures and supply Pig Iron and Cement, in the process. In addition, the Company is also manufacturing and selling cement, as well as producing Pig Iron and LAM Coke for captive use. The Company’s manufacturing unit is located at Rachagunneri Village, Srikalahasthi Mandal, Chittoor District, Andhra Pradesh.

Industry Outlook:

The Government of India is committed for higher investment in the water Sector. It is expected that the demand for Indian pipe industry will continue to remain healthy, considering Government’s focus for water infrastructure projects,resulting in the growth of pipe industry

Increased focus on Construction of Water Grids across the country on the front of Infrastructure improvement will turn positive to the company in the Future

Company Outlook:

Reduction in Input Power Costs:
It has been the constant endeavour of the Company to create value addition in every facet of Company’s operations, which the Company believes as the major factor in reinforcing the value chain in terms of cost reduction and productivity improvement. Installation of additional boiler and the Sinter plant continued to result in higher power generation and lower input cost.

In this process the company has carried out mergers and backward integration and increase in capacity of in house power generation.

Reduction in Input Raw Material Costs:
The company's main raw material is iron.Keeping this in mind the company has taken steps to produce iron in an cost effective and uninterrupted manner thereby reducing the raw material Input Cost

The Result of Establishment of Sinter Plant has been discussed in The Hindu as follows http://www.thehindubusinessline.com/companies/new-sinter-plant-helps-srikalahasthi-pipes-triple-net-profit/article6842591.ece

Also the company is seeking joint venture partners for its spare capacity so that it can increase its profitability http://www.thehindubusinessline.com/companies/srikalahasthi-pipes-seeks-joint-venture-partners/article6842726.ece

Lanco Industries to ride on PM Narendra Modis Rural Infra Push http://www.deccanchronicle.com/140806/business-latest/article/lanco-industries-pipes-ride-pm-narendra-modi%E2%80%99s-rural-infra-push

Negative Side:

1. Due to high level of un-predictability in the prices of major raw materials used by the Company, it is open to the risk of narrowed margin.
2.Considering overseas procurement of raw materials, machinery and exposure to External Commercial Borrowings, the Company is exposed to foreign exchange risk.-This Leads to Increase in Input Raw material Costs


The Financial Performance and company's Financial position can be viewed @Nseindia.com , Bseindia.com or Click Here

The stock is undervalued compared to Industry Valuation and its Consistent Financials and Future prospects,

Hence,We consider it as an opportunity to add into the portfolio @CMP 176 for longterm view of atleast 1 year. The stock is listed in both the exchanges.

Note: Disclaimer: This Blog, its owner, creator & contributor is neither a research analyst nor an Investment Advisor and expressing opinion only as an Investor in Indian equities.He/She is not responsible for any loss arising out of any information,post or opinion appearing on this blog.Investors are advised to do own due diligence and/or consult financial consultant before acting on any such information.Author of this blog not providing any paid service and not sending bulk mails to anyone.