Good Luck Steel gets Approval from RDSO (Ministry of Railways)

This is a major boost for company’s structure division and justify ongoing capex of Rs.30 cr. Railway is one of the key focus sector of Good luck’s future vision, M C Garg said

Lucknow: In line with Company’s growth strategy, Good Luck has achieved another milestone with the approval of RDSO (Research Design & Standards Organization), Ministry of Railway, India for fabrication and supply of Steel Bridge Griders.

Indian Railway, one of the world’s largest network, is in big ticket expansion mode with planned Dedicated Freight Corridors (DFCs) of approx. 6200 kms and upgrade feeder route to DFCs of approx. 6000kms.

Further, Railway plan to convert all railway crossings to Railway Over bridges (ROBs) is offering approx. 3mn. metric ton capacity of fabricated bridge.

M C Garg, Chairman said, “This is a major boost for company’s structure division and justify ongoing capex of Rs.30 cr. Railway is one of the key focus sector of Good luck’s future vision. This approval is likely to give wings to achieve our target.”

As part of their expansion projects, like developing railway crossings and dedicated freight corridor, there is likely to be demand for at least 3 million tonnes of steel fabrication, which will provide good business opportunity for the company, says Ram Agarwal, CEO of GoodLuck Steel Tubes.

The Company is visualizing a huge scope of its products such as CDW tubes, forging, structure fabricated items in the Expansion of Railway Infrastructure. The Company is eying a good amount of share from different railway projects. Good Luck has already got entry in LHB coach parts & HTM, motor shaft in Electric loco engines.

Expect Rs 40-50cr railways order in FY17: GoodLuck Steel

The approval from Research Design and Standards Organisation (RDSO), Ministry of Railway, India for fabrication and supply of steel bridge girders will lead to increased business from railways over next two years, says  Ram Agarwal, CEO of GoodLuck Steel Tubes.

Goodluck Steel Tubes Ltd is currently trading at Rs.100, up by Rs. 3.7 or 3.84% from its previous closing of Rs. 96.3 on the BSE.

The scrip opened at Rs.96.1 and has touched a high and low of Rs.101 and Rs.96 respectively. So far 208081 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 211.92 crore.

The BSE group ‘B’ stock of face value Rs. 2 has touched a 52 week high of Rs. 117.85 on 15-Jul-2015 and a 52 week low of Rs. 64.9 on 24-Dec-2014. Last one week high and low of the scrip stood at Rs. 98.8 and Rs. 92.6 respectively.

The promoters holding in the company stood at 60.46 % while Institutions and Non-Institutions held 0.17 % and 39.37 % respectively.

The stock is currently trading below its 50 DMA.

“Currently, contribution from railways business to our revenue is miniscule. However, we expect the share to increase to 5-7 percent over the next couple of years”, Agarwal says, adding that next year the company is likely to bag orders from railways worth around Rs 40- 50 crore. Railways are in a rapid expansion mode and as part of the development of railway crossings and dedicated freight corridor, there is likely to be demand for at least 3 million tonnes of steel fabrication, which will provide good business opportunity for the company, Agarwal says. He also pointed that the margins from railway’s orders is reasonably good at 15-18 percent. Below is the verbatim transcript of Ram Agarwal’s interview:

Q: The approval that you have got from the Research Department of railways, what is the order opportunity for a company?

A: This will convert into a big order for us.

Q: What is the expected size?

A: The expected size of order should be around Rs 40 crore to Rs 50 crore next year. However, they are more to be done but initially I look forward for Rs 40 crore to Rs 50 crore next year because there are 11,500 crossings, which are to be covered by Supreme Court orders. There is 6,200 km freight corridor to come. So 3 million tonne steel fabrication has to come and even if I get half percent of this, it will be a big gain for the company.

Q: You have some approvals for Linke Hofmann Busch (LHB) coaches as well as electric engines and stuffs. Have any orders come in from those segments?

A: We are executing development order for LHB coaches and we have come to P2 stage for HTM, motor shafts.

Q: How big are those orders?

A: These orders are on the development stage. These orders are only Rs 3-4 crore, because in railways first year is only development mode, second year is 25 percent order and third year it is a full-fledged order. We are in the first order, so in next two years we can expect. We can get good business in those areas also.

Q: What is the current order book of the company on a consolidated basis?

A: This order book, I am having around nine months. Mangalam: What is the proportion of revenues coming in from the railways already to the company? A: It is very minuscule from railways but in the next financial year it should be around 5-8 percent from railways.

Q: What are the margins that you enjoy on orders from the Indian Railways?

A: Normally Indian Railway is giving an EBITDA margin of 15-18 percent in the product line that we are in, but it is to be seen how the orders come but I am looking a rosy picture for that because government is in development mode on railways and railways and solar are engines of growth for Good Luck to take us forward. Good Luck Steel stock price On December 21, 2015, Good Luck Steel Tube closed at Rs 99.90, up Rs 3.60, or 3.74 percent. The 52-week high of the share was Rs 117.85 and the 52-week low was Rs 64.90. The company’s trailing 12-month (TTM) EPS was at Rs 15.73 per share as per the quarter ended September 2015. The stock’s price-to-earnings (P/E) ratio was 6.35. The latest book value of the company is Rs 82.24 per share. At current value, the price-to-book value of the company is 1.21.

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