TRF Ltd, (A Tata Enterprise) - Rocket Stock-Buy

TRF a Tata group company put up a stellar performance in Q4 FY09. This, in spite of the fact that the first half of the year was poor to say the least. But during Q4, the company posted a a 55% growth in net profits. The order book increased by 33% to 1360 cr which is 2.3x it’s FY09 revenues. The company’s performance in Q4FY09 took the EPS for the entire year higher than the last year’s EPS. The consolidated adjusted EPS for FY08 was 54.1 per share and that for FY09 was 73.8, an increase of 36.41%. The company has called a board meeting 0n 16^th June 2009 to consider a bonus issue. The stock price has shot up since the announcement of the results. And that too very handsomely. From Rs325 in Jan 2009 the stock has shot up to 715.60.(As on 2^nd June 2009) an increase of 120.18%. And this is not the end. The stock has the potential to go up another 300% in a time frame of 2-3 yrs. This is truly a rocket stock. The projects division of the company faired extremely well during the year. Same for the MHE division. This is an engineering and capital goods company mainly catering to the infrastructure sector. As you all know the new government at the helm is laying great thrust on infrastructure development and the order book may swell in the next two years. At a CMP of Rs 715.60 the stock is currently quoting at a P/E of 5.7 FY11 and a price to book value of 1.5. The company aims to achieve a turnover of 1000 cr next fiscal.

Quarterly results on a y-o-y basis (in crs)

Heading	Q4FY08	Q4FY09	% inc/(Dec)
Sales	169.74	239.53	41.12
Other Income	2.55	1.88	(35.64)
Total Income	172.29	241.41	40.12
Total Expenses	146.90	202.34	37.74
Operating profit	22.84	37.19	62.83
EO inc/Exp	-0.02	-0.02	0
Gross Profit	25.39	39.07	53.88
Interest	0.89	1.86	108.99
PBDT	24.47	37.19	51.98
Dep	0.39	0.51	30.77
PBT	24.08	36.68	52.33
Tax	8.66	12.78	47.58
Net Profit	15.42	23.90	54.99
EPS	28.02	43.43	55

Introducing 2010 and 2011 estimates (consolidated)

Yr-Mar	Sales	PAT	EPS	ROE	P/E
2008	4463	397	54.1	23.3%	9.4
2009	7238	405	73.8	28.1%	6.9
2010	1000	580	105.45	26.93%	6.79
2011	1100	693	126	24.75	5.7

Company History

1988 - A substantial portion of the company's business comprises execution of turn-key contracts which were executed over a period of two to three years depending upon the magnitude of the project. The drop in turnover was due to the fact that there were no major contracts which reached substantial completion during the year.

- The Company also took up the manufacture of stamping charging pushing machine and charging gas cleaning cars for Tata Steel.

1989 - A repeat order was received from Tata Steel for a stamping charging pushing machine and charging gas cleaning car for its coke oven battery No. 6.

- A portion of Rs. 60 of each debenture was to be compulsorily converted into 4 equity shares of Rs. 10 each at a premium of Rs. 5 per share as on 1st March.

- The non-convertible portion of Rs. 100 of each debenture would be redeemed at par after the expiry of 7 years from the date of allotment of the debentures.

- Drop in Company's turnover was due to the fact that there were no major contracts which reached substantial completion during the year.

1994 - As a part of its diversification plans, the first phase of the steel service centre was implemented.

- 15,60,108 shares allotted on rights basis.

1995 - Company has been awarded Iso 9001 certification during the year.

- During February the Company made a Rights Issue of 15,60,836 equity shares of Rs. 10 each at a premium of Rs. 15 per share in the ratio of 1:2 (only 15,60,148 shares were taken up). The remaining 688 shares were reserved for allotment as per approval of Regional Stock Exchange, Patna.

1996 - The expansion plans for putting up a composite steel service centre at Bara near Agnrio Jamshedpur made satisfactory progress. The additional slitting lines were commissioned and a pickling line was under advanced stage of installation.

- Tata-Ryerson Ltd. was formed to provide value added steel service centre facilities throughout the country. In addition, the company's steel service centre at Bara with all its plants, machineries and buildings etc. were to be sold by negotiation to Tata Ryerson Ltd.

1997 - The Company had sold its steel service centre assets and Bara for a consideration of Rs. 14 crores to Tata-Ryerson Ltd.

- As a part of its ongoing technology upgradation and innovation programme the company has signed an MOU with M/s. Tip-Top Saar GmbH, Germany for acquiring state-of-the-art knowhow for conveyor belt reconditioning plant.

- In order to augment the long term resources for its working capital requirements and for modernisation of its plant facilities, the Company offered during June/July 1988, 2,88,540-12.5% secured partly convertible debentures of Rs. 160 each for a total value of Rs. 461.66 crores. Out of the total issue, 2,74,500 debentures were offered to the equity shareholders of the Company on a right basis in the ratio of 4 debentures for every 25 equity shares held and the balance 13,740 debentures were offered to the employees (including Indian working directors)/workers of the Company on equitable basis. Unsubscribed portion, if any, of the employee's quota was to be allowed to lapse. Accordingly, the Company allotted 2,74,800 debentures to the equity shareholders and 3,118 debentures to the employees.

- 53 shares out of 635 shares whose title was in dispute, issued.

1998 - The Company successfully commissioned the projects of Stamp Charging machine for Tata Steel's Battery No.8, Coal Dust Injection Systems for SAIL, Coal Handling Plant for Rajasthan and Andhra Pradesh.

1999 - Amalgamation of M/s. Tata Material Handling Systems Ltd., (TMHS) and Tata Technodyne Ltd. (TTDL), with the Company effective 1st April was approved in the Board Meeting held on 30th March, 1990.

2007

-TRF Ltd has appointed Mr. Sudhir L Deoras as an Additional Director of the Company with effect from January 22, 2007.

-2009 On 1^st June TRF reported an Alliance with Tata Capital and Jasper Industries to form a Joint Venture Company.

Price Target: Rs 2400 by FY2011.

Potential upside: 235.38%