Adhunik Metaliks’ (AML) aggressive foray into merchant mining with
reserves of 90 million tonnes (MT) of iron ore and 50 MT of manganese
ore has placed it in a superior position compared to its peers. The
company has also forayed into the merchant power business recently,
through its 98.7% subsidiary Adhunik Power & Natural Resources
(APNRL) with an initial capacity of 540 MW (2X270) at Jamshedpur by
FY12. With the full ramping up of mining activities coupled with power
business we believe the company would show significant growth in
both topline and bottomline within a couple of years.
At the current price of 116, the stock is discounting its FY11E BV by 1.9x,
FY11E EV/EBITDA by 6.85x and FY11EPS by 10.6x. We value the
company on its FY10E consolidated BV. Taking into account the stable
business outlook, high quality mining reserves and the prospects ahead
with foray into merchant power, we are assigning a multiple of 2.4x
FY11E BV of Rs 62.1 to the stock and revising our target price to Rs 149.
• The stock has formed a rounding bottom pattern on the weekly chart.
The price rise with huge volume during last week’s trade suggests
bullishness in the stock
• On the weekly chart, it has formed a bullish Engulfing candlestick
pattern and closed above the trading range (90-109) of the last two
• On the lower side, the stock has strong support at Rs 102 levels from
the long tern trend line joining the low of March 6 2009 (Rs 24) and
June 19 2009 (61.60)