Private Entity Report On Nelcast Courtesy - RMS

CA Sajeesh Krishnan K
Founder & MD AAA Profit Analytics Pvt. Ltd.

SEBI Reg. No. : INH200009193
Retail Equity Research
GOLDEN PICK III
Ground Floor Alma Complex, Lions Club Road, Polyjunction, Triprayar -680567 Kerala , India
Whatsapp : 9061199000 www.aaaprofitanalytics.com
Expected Holding Period : 1 Year
Buy : NELCAST LTD
Buy Below : 150
Target : 225
Market Capitalization : 1062.71 crores
Industry : INDUSTRIAL PRODUCTS
Consolidated EPS : 3.35
Consolidated PE : 36.46
Price to Book Value : 2.27
BSE Code : 532864
NSE Symbol : NELCAST
COMPANY OVERVIEW
Nelcast Limited is a leading producer of Ductile & Grey Iron
Castings in India with an installed capacity of 160,000 Metric
Tons/Year.Nelcast has focused on producing superior quality
castings for a wide range of Industries. This focus has helped it
grow over the last three decades to a position of market
leadership with a production capacity of 160,000 Metric
Tons/Year. Presently Nelcast is the Largest Jobbing Foundry in
India for the manufacturing of Ductile & Grey Iron Castings.
Nelcast products cater to the Global Automotive, Tractor,
Construction, Mining, Railways and General Engineering
sectors. The company has a diversified customer base including
Original Equipment Manufacturers (“OEM”) and Tier-1
customers in the Commercial Vehicle, Tractor, Railways and Off-
Highway Vehicle segments spread across India, Europe, North
America and Southeast Asia.
Company is a trusted partner and a strategic supplier with long-

standing strategic relationships with TAFE, Tata Motors, Ashok
Leyland, Volvo-Eicher Commercial Vehicles, Same Deutz-Fahr
India, Daimler, Automotive Axles, Dana, American Axles &
Manufacturing, Comer Industries, Meritor, Wabtec, ZF. Besides
having a wide customer base across several industries and
geographies, Nelcast also prides itself on being a one stop shop
for their customers by being able to supply castings of several
different grades and sizes. Company has three plants and the
corporate office is located in Chennai, India.
COMPANY OVERVIEW
LARGEST TOP 10
PRODUCER PRODUCER
of Ductile
of Grey Iron
Iron Castings
Castings
ONLY STATE OF ART

CASTING MANUFACTURER MANUFACTURING FACILITIES
with a product range for High Pressure

Green Sand
from 0.5-400Kg
Moulding
STRONG IATF & ISO

CUSTOMER BASE CERTIFIED
for Quality,
with supplies
Environment,
to 40+ customers
Health & Safety
across segments
Systems
MANAGEMENT COMMENTARY (Extract from Nelcast
Limited’s Q1 FY24 Earnings Conference Call.)
Our total revenues for the quarter stood at Rs. 296 crores, which is down 1.1%
year-on-year due to subdued demand in tractors and lower than expected
performance in M&HCV. Our export business reported a strong growth of 23%
year-over-year, and we did approximately Rs. 89 crores of export during the
quarter. As stated in the previous call, our EBITDA per kg was impacted last
quarter due to divergence between international and domestic raw material
prices in indices. However, we saw that converge this quarter. This has led to
significant improvement on quarter-on-quarter basis and a more normalization in
the EBITDA per kg at Rs. 11.7 per kg. Besides this, increased share of exports
where we have better realizations also helped us achieve this EBITDA per kg.
During the quarter, the segmental revenue was that M&HCV contributed 39% of
our overall revenues. Exports was 31%, tractors was 25%, railways and off
highway equipment contributed close to 3%.
Looking at the future, we expect M&HCV segment to have a strong year,
especially in the second half. This is based on the demand forecasts of our
clients and the infrastructure spends by the government. So, the infrastructure
spend increase generally means an increase in demand for tippers. Tippers
generally have a tendency to have a greater requirement of casting content and
our share of business in these castings is also higher. So, we expect to benefit
from this. We expect the overall tractor industry to remain flat in the quarters to
come as well. This is primarily due to some, I would say, tightness in the rural
economy. Our export business will continue its growth trajectory on the back of
a strong order backlog. We expect some contribution from new product launches
as well because we've now undergone the full ramp up now as we go forward,
and one or two new product launches are also planned towards the end of the
year. Based on these factors, we expect that the performance will improve in the
second half of FY24 and will definitely be on track for achieving a double-digit
topline growth for the full year.
Mr. P. Deepak
Managing Director and Chief Executive Officer
FII Holding%:
2
1 0.83 0.85 0.88

0.79
0.03
0
Promoter’s Holding%:
100
74.87 74.87 74.87 74.87 74.87

75
50
25
Shareholding Details:
0%
23%
1%
0%
76%
Promoter MF FII Public Other
Interim Results:
(Rs Crore)
Quarter
Jun '23 Mar '23 Dec '22 Sep '22 Jun '22 Mar '22 Dec '21 Sep '21
Ended
Operating
292.8 313.2 327.0 328.5 295.2 267.9 232.2 238.0
Revenue
Operating
273.4 294.4 312.4 301.6 276.2 250.9 221.7 225.4
Expenditure
Operating
19.3 18.8 14.6 26.9 19.0 17.0 10.6 12.6
Profit
Operating
6.60% 6.01% 4.46% 8.20% 6.43% 6.35% 4.55% 5.29%
Margin
Other
3.6 2.0 6.7 3.1 4.3 3.9 4.9 4.0
Income
Depreciation 5.9 6.5 6.1 5.8 5.7 5.7 5.7 5.7
Interest 7.9 8.4 8.1 8.0 6.7 6.9 6.9 6.3
Tax 2.0 1.5 1.8 4.2 3.1 1.6 0.8 1.3
Net Profit 7.2 4.5 5.3 12.2 7.8 6.8 2.1 3.4
Operating Revenue (in Crores) – Quarterly :
400
328.5 327 313.2
295.2 292.8
300 267.9
238 232.2
200
100
Operating Profit (in Crores) – Quarterly :

40
30 26.9
19 18.8 19.3
20 17
12.6 14.6
10.6
10
Net Profit (in Crores) – Quarterly :

30
20
12.2
10 6.8 7.8 7.2
5.3 4.5
3.4 2.1
0
Financial Summary:
(Rs Crore)
Year Ended Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Period (in
12 12 12 12 12
months)
Operating
1264.0 927.3 611.0 566.8 856.3
Revenue
Operating
1,184.60 869.3 568.6 518.5 780.4
Expenditure
Operating
79.4 58.1 42.4 48.3 75.9
Profit
Operating
6.28% 6.27% 6.94% 8.52% 8.86%
Margin
Other
16.1 9.4 8.9 10.6 5.9
Income
Depreciation 24 22.6 21.7 18.5 17.5
Interest 31.2 25.8 17.2 9.5 6.6
Tax 10.6 4.8 3.2 -5.2 19.3
Net Profit 29.7 14.2 9 36.0 38.4
Operating Revenue (in Crores) – Yearly
1600
1264
1200
856.3 927.3
800 566.8 611
400
Operating Profit (in Crores)– Yearly

100
75.9 79.4
75
58.1
48.3
50 42.4
25
Net Profit (in Crores) – Yearly

50
38.4 36
40
29.7
30
20 14.2
9
10
0
Operating Profit Margin (%) – Quarterly
9 8.2
6.35 6.43 6.6
6.01
6 5.29
4.55 4.46
Operating Profit Margin(%) – Yearly

8.86 8.52
9
6.94
6.27 6.28
6
Balance Sheet:
(Rs Crore)
Year Ended Mar-23 Mar-22 Mar-21 Mar-20 Mar-19
Equity &
Liabilities
Share Capital 17 17 17 17 17
Reserves &
451 424 412 402 377
Surplus
Current
412 340 262 184 246
Liabilities
Other
148 182 148 179 141
Liabilities
Total
1,028 963 839 782 781
Liabilities
Assets
Fixed Assets 472 480 468 469 421
Current Assets 541 480 366 309 351
Other Assets 15 3 5 4 9
Total Assets 1,028 963 839 782 781
KEY PRODUCTS
Commercial Vehicle Tractors: Off Highway

Components: Equipment:
Forward Differential Transmission Housing Trumpet Axle

Carrier Housing
Rear Differential Carrier Rear Axle Housing Monolithic Axle

Housing
Bogie Suspension Bracket 4WD Axle Housing

Forklift Steer Axle
KEY PRODUCTS
Railways: Passenger Vehicles:
Metro Rail Baseplates Differential Case
Brake Disc Friction Differential Carrier

Ring
WELL EQUIPPED PLANTS
INSTALLED CAPACITY:
60,000 Metric Tons per Year
INSTALLED CAPACITY:
INSTALLED CAPACITY:
MARQUEE CUSTOMERS
Company has a diversified customer base including Original
Equipment Manufacturers (“OEM”) and Tier-1 customers in the
Commercial Vehicle, Tractor, Railways and Off-Highway Vehicle
segments spread across India, Europe, North America and
Southeast Asia..
KEY STRENGTHS
➢ Diversified Customer Base with Strong Relationships:
Customers in Commercial Vehicle, Tractor, Off-Highway Equipment,

Railways and Passenger Vehicles
Has a distinguished customer base of more than 40 customers that

includes OEMs and Tier 1 companies
A one-stop shop for its customers for Grey Iron, Ductile Iron and
Austempered Ductile Iron ranging from 0.5 Kg to 400 Kg
➢ Strong Business Foundation:

Received an investment grade rating for short term (A1) and long term
(A) fund from ICRA on the back of adequate liquidity, strong relationship
with major OEMs and a diversified clientele
Installed Capacity has been created for 160,000 Metric Tons per Year. Can
be further enhanced by 50,000 MT within the existing plants with
minimal investment.
120.0 104.8
90.0 65.0
58.7 61.4
60.0 48.0
30.0
0.0
Cash & Cash equivalent (in Rs. Cr.)
KEY STRENGTHS
➢ Strategic Location:
Plants are in close proximity (37-140 KM) to Chennai, a major
manufacturing hub for automotive companies forms both a key customer
base for Nelcast and a reliable source of steel scrap, a crucial raw material
All 3 plants are within 15-110KM of India’s largest source of Silica Sand
near Gudur
Chennai’s International airport with direct flights to Europe, Middle-East

& Southeast/East Asia makes it convenient for customers to visit and see
the world class facilities firsthand
Close proximity to Krishnapatnam & Chennai seaports gives easy access

to Nelcast to reach its customers around the world
KEY STRENGTHS
➢ Strong Export Growth Potential:
India is being viewed as a key cog in the global automotive supply chain
and sourcing machined castings from India is now becoming an attractive
option for global customers.
Nelcast is among only a few companies in the industry capable of

meeting the requirements of top global OEMs & Tier 1 customers.
Currently, Nelcast exports machined castings to reputable corporates in

North America, Europe and Southeast Asia.
329.4
300.0
221.5
200.0
112.4 126.3
90.0
100.0 58.4
0.0
Revenue from Exports (in Rs. Cr.)
KEY STRENGTHS
➢ Large Market Opportunity:
Indian Tractor Industry:

Industry volumes touched all-time high in FY2023; expected to remain
stable
The tractor demand declined in FY22 due to delayed harvests and

stagnant rural wage growth. However, the industry had a strong FY2023
driven by rise in minimum support prices which led to an increase in farm
income, another year of above-average monsoon coupled with
technological advancements.
899.0 945.0
1000.0 780.0 842.0
800.0 705.0
600.0
400.0
200.0
0.0
Sale Units (in Thousands)
Indian M&HCV Industry:

Domestic M&HCV sales to grow at a CAGR of 22% between 2020-2025;
expected to touch over 600,000 units
The heavy-duty trucks account for over 55% of the total M&HCV sales
in India. They are estimated to continue their dominance in the years to
come, followed by buses, the worst-affected segment in the pandemic, is
predicted to be the fastest growing, due to low base effect.
CHART
VERDICT
Established in 1985, Nelcast has since been a significant and

diligent participant in the ferrous casting industry, producing
superior quality castings for many industries. Catering to the
commercial vehicle industry and the tractor industry , Nelcast has
diversified into various other industries to increasingly fulfill their
casting needs. Today, Nelcast is one of India’s largest suppliers of
the finest ductile iron castings ranging from 0.5 kgs to 400 kgs in
weight. Climbing it’s way up the ladder of competition, Nelcast’s
focus continues to be on meeting international standards of quality
at competitive prices.
Nelcast currently supplies components to a wide spectrum of
customers and is committed to satisfy the varying and diverse
customer requirements. Nelcast has a specific, yet continuous
production process that caters to every function needed to
produce a technologically acceptable casting component.
Complete with melting,moulding and core shops to development
and quality control, Nelcast takes every step necessary to
creating the right component for every client in the shortest span
of time.
VERDICT
India is being viewed as a key country in the global automotive

supply chain and sourcing machined castings from India is now
becoming an attractive option for global customers .Nelcast is
among only a few companies in the industry capable of meeting
the requirements of top global OEMs & Tier 1 customers.
Currently , Nelcast exports machined castings to reputable
corporates in North America ,Europe and Southeast Asia.
Nelcast reported Rs.7.18 Crore net profit in June 23 quarter
which is almost in line with the June 22 quarter. We anticipate
good performance in coming quarters driven by strong demand
in commercial vehicles and exports.
We expect Nelcast will benefit from this surge in demand, and
the company’s stock to outperform in next 12 months.
Considering strong growth outlook, better margins, we
recommend a buy in Nelcast Limited for a target of Rs.225 in
the next 12 months.
DISCLAIMER & DISCLOSURE
▪ AAA Profit Analytics (P) LTD , is registered as a Research Analyst with SEBI bearing registration
Number INH200009193 as per Securities and Exchange Board of India (Research Analyst) Regulations,
2014. AAA Profit Analytics (P) LTD offer equity research services to clients as well as prospects.
▪ The analyst for this report certifies that all of the views expressed in this report accurately reflect his or
her personal views about the subject company or companies and its or their securities, and no part of his
or her compensation was, is or will be, directly or indirectly related to specific recommendations or
views expressed in this report.
▪ Other disclosures by AAA Profit Analytics (P) LTD and its Research Analyst with reference to the subject
company(s) covered in this report:
1. AAA Profit Analytics (P) LTD does have any financial interest in the subject company: NO
2. Research Analyst or his/her relative’s have financial interest in the subject company: NO
3. AAA Profit Analytics (P) LTD and Research Analyst or his/her relative’s does have any
material conflict of interest in the subject company (NO)
4. Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more
Securities of the subject company at the end of the month immediately preceding the date
of publication of Research Report: NO
5. The research Analyst has served as officer, director or employee of the subject company:
NO
6. Whether it or its associates have received any compensation from the subject company in
the past twelve months : NO
7. Whether it or its associates have managed or co-managed public offering of securities for
the subject company in the past twelve months : NO
8. Whether it or its associates have received any compensation for investment banking or
merchant banking or brokerage services from the subject company in the past twelve
months: NO
9. Whether it or its associates have received any compensation for products or services other
than investment banking or merchant banking or brokerage services from the subject
company in the past twelve months: NO
10. Whether it or its associates have received any compensation or other benefits from the
subject company or third party in connection with the research report: NO
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the past twelve months: NO
12. Whether the subject company is or was a client during twelve months preceding the date of
distribution of the research report and the types of services provided: NO
13. Whether the research analyst has served as an officer, director or employee of the subject
company: NO
14. Whether the research analyst or research entity has been engaged in market making
activity for the subject company: NO
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▪ This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in
any jurisdiction where such an offer or solicitation would be illegal. It is for the general information
of the users of AAA ProfitAnalytics (P) LTD.
▪ While reasonable care has been taken in the preparation of this report, it does not purport to be a
complete description of the securities, markets or developments referred to herein, and we do not
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Name of Research Analyst registered

with SEBI :
AAA Profit Analytics (P) LTD

INH200009193 Compliance Officer :
Ground Floor Alma Complex Mini Sasi
Lions Club Road Mob.: 8078028000
Polyjunction, Triprayar -680567 E-mail ID: minisasiaaa@gmail.com
Kerala , India
Mob.: 9061199000

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CA Sajeesh Krishnan K

Founder & MD AAA Profit Analytics Pvt. Ltd.

GOLDEN PICK III

Company is a trusted partner and a strategic supplier with long-

ONLY STATE OF ART

with a product range for High Pressure

STRONG IATF & ISO

1 0.83 0.85 0.88

74.87 74.87 74.87 74.87 74.87

Promoter MF FII Public Other

Depreciation 5.9 6.5 6.1 5.8 5.7 5.7 5.7 5.7

Interest 7.9 8.4 8.1 8.0 6.7 6.9 6.9 6.3

Tax 2.0 1.5 1.8 4.2 3.1 1.6 0.8 1.3

Operating Profit (in Crores) – Quarterly :

Net Profit (in Crores) – Quarterly :

Year Ended Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Depreciation 24 22.6 21.7 18.5 17.5

Interest 31.2 25.8 17.2 9.5 6.6

Tax 10.6 4.8 3.2 -5.2 19.3

Net Profit 29.7 14.2 9 36.0 38.4

Operating Profit (in Crores)– Yearly

Net Profit (in Crores) – Yearly

Operating Profit Margin(%) – Yearly

Year Ended Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Fixed Assets 472 480 468 469 421

Current Assets 541 480 366 309 351

Total Assets 1,028 963 839 782 781

Commercial Vehicle Tractors: Off Highway

Forward Differential Transmission Housing Trumpet Axle

Rear Differential Carrier Rear Axle Housing Monolithic Axle

Bogie Suspension Bracket 4WD Axle Housing

Railways: Passenger Vehicles:

Metro Rail Baseplates Differential Case

Brake Disc Friction Differential Carrier

Customers in Commercial Vehicle, Tractor, Off-Highway Equipment,

Has a distinguished customer base of more than 40 customers that

➢ Strong Business Foundation:

Cash & Cash equivalent (in Rs. Cr.)

Chennai’s International airport with direct flights to Europe, Middle-East

Close proximity to Krishnapatnam & Chennai seaports gives easy access

Nelcast is among only a few companies in the industry capable of

Currently, Nelcast exports machined castings to reputable corporates in

Revenue from Exports (in Rs. Cr.)

Indian Tractor Industry:

The tractor demand declined in FY22 due to delayed harvests and

Sale Units (in Thousands)

Indian M&HCV Industry:

Established in 1985, Nelcast has since been a significant and

India is being viewed as a key country in the global automotive

Name of Research Analyst registered

AAA Profit Analytics (P) LTD

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