Tata Metaliks

Tata Metaliks (TML), promoted by Tata Steel, has been engaged in the
production of pig iron since 1994. Pig iron is used in the manufacture
of rolling mill rolls, automobile engine blocks, motor and generator
housings, gears, railways and machine tools.

In October 2007, TML signed a joint venture agreement with Japanese
companies Kubota Corporation and Metal One Corporation to set up Tata
Metaliks Kubota Pipes, to manufacture ductile iron pipes. The company,
headquartered in Kolkata, has a capacity to make 110,000tpa (tonnes per
annum) of ductile iron pipes at its facility within the TML pig iron
plant in Kharagpur, West Bengal. TML's other manufacturing facility is
at Redi in Maharashtra.

TML has acquired captive iron ore, manganese, limestone and dolomite
mines towards achieving raw material security. TML has been granted a
prospecting licence for iron ore mines at Dongarpal in Maharashtra. The
company is also pursuing a sinter plant at Kharagpur, 120,000tpa
capacity non-recovery type coke ovens at Redi and Kharagpur and a coal
dust injection plant at Kharagpur. Other projects are captive power
plants at Kharagpur and Redi that will utilise flue gases from the coke
ovens.

The company recently signed a memorandum of understanding with the
Karnataka government for an integrated steel project of 3mtpa at Haveri.
It has received approval for land, power and water supply for the
project, which will be implemented in association with Tata Steel and is
pursuing the allotment of iron mines.

The company produced 506,301million tonnes (MT) of hot metal in FY09-10
compared to 386,685MT in the previous year. In the quarter to June 2010
it reported a profit of Rs10.30 crore against a loss of Rs14.93 crore in
the previous corresponding quarter. Net sales surged 48.12%, to Rs273.21
crore from Rs184.45 crore. Average sales growth in the past three
quarters has been a high 54%. The drawback for TML is that margins are
low (10%), so a slight dip in sales could result in profits falling, as
was the case in 2009. Buy the stock now (current market price Rs138.95)
for a rally at least up to Rs210.