Stock of this iron & steel company has zoomed 54% in 1 month; hits new high

In the past three months, stock price of Sunflag Iron & Steel has zoomed nearly 80 per cent, as compared to 1 per cent gain in the benchmark index.

Shares of Sunflag Iron & Steel Company hit a new high of Rs 145.50, as they rallied 5 per cent on the BSE in Wednesday's intra-day trade, in an otherwise weak market. In the past two trading days, the stock of iron & steel company has surged 12 per cent. In comparison, the S&P BSE Sensex was down 1.2 per cent at 60,269 at 11:54 AM.

In the past one month, the stock price of Sunflag Iron & Steel has zoomed 54 per cent, as against less than 1 per cent rise in the Sensex. Further, in three months, it has zoomed nearly 80 per cent, as compared to 1 per cent gain in the benchmark index.

Sunflag Iron & Steel is engaged in manufacturing of mild-steel and alloy steel products of varieties like carbon steel, free & semi free cutting steels, micro-alloyed steel, stainless steel, spring steels, valve steel, bearing steels, quality steels, tool steel etc.

The product range of the company includes Rolled products, Billet/Bloom, Ingots, and Bright Bars etc. of varied shape and size range. These products are mainly used for manufacturing Automotive Transmission Gears, Drive Shafts, Steering System, Bearings, Exhaust System and other Engine Components.

The company also supplies to Indian Railways, Ordnance Factories, Power Sectors & other General Engineering areas for manufacture of critical application components.

Sunflag Iron & Steel reported significant improvement in its operating performance during FY22, marked by healthy profitability margins and increase in sales volumes, resulting into strong cash flows. On January 5, 2023, CARE Ratings reaffirmed the ratings of bank facilities and instruments with ‘stable’ outlook.

"The rating factors in the benefit of the rich experience of the promoters exhibiting long track record in steel industry, integrated manufacturing steel plant, located strategically in central part of the country, strong and large marketing network and selling arrangements," CARE Ratings said in rationale.

In addition, CARE also considered the healthy financial risk profile of the company along with average debt coverage indicators and strong liquidity position demonstrated by moderate utilization of its bank facilities. Furthermore, CARE has also positively considered the order passed by the Tribunal with respect to the dispute settlement with Lloyds Metal and Energy Limited, the rating agency added.

Meanwhile, steel industry's capacity utilisation is expected to be of the order of 80 per cent to 90 per cent during the fiscal 2022-23, it had said in its FY22 annual report.

"Sunflag is mainly catering to automobile industry, and demand in this segment is expected to grow marginally in the current FY2023. Although the recent reduction in the prices of input raw material viz. Iron ore, melting scrap etc., may ease out working capital margin, but with the increase in the interest rate may be strain on the bottom line for the large borrower. Further the recent Government policies viz. production linked incentive, semiconductor manufacturing, extension of FAME-II till 2024 are the positive outlook for the automobile industry," the company said.