*Q4 NP MORE  NP OF 9M*

Balasore Alloy Ltd

BAL is 2nd largest producer of Ferro Chrome in India. Co has its _own captive Ore mines_. Hence cost of production of Ferro Chrome per ton is largely fixed.

Balasore alloy had produced 1.22 lac tonnes in FY16.

Production in FY17 should be at least 1.35 lac tonnes

_Co is in position to produce 1.45 lac ton in FY18 as installed capacity is 1.65 lac ton_

Financials:

            9mFY17. FY17

Sales.    678.      1012

NP.         43.52.     90

Equity.    39.44.   44.4

EPS Rs.                11.35

Balasore made NP of 43.52 cr in 9 month of current year on 39.44 cr Equity. No *NP OF Q4 ALONE IS 46 CR*

In recent weeks, there is fall in Ferro Chrome prices. However, BAL should still post handsome nos for FY18:
a) BAL is lowest cost producer of Ferro Chrome with cost of Rs60000 per ton. Current mkt price despite fall are still much higher. Moreover *higher production in current year will compensate for fall in selling price*

b). One-third of contracts are booked on yearly basis. It means co will get benefit of high price in current year as well
c) one-third contracts are quarterly basis. So impact of higher price will add to profits in Q1

d) one-third contracts are booked on spot basis. So if Ferro Chrome price rise again, BAL will benefit from same

e)Finally *promoter taking P Offer of 3.50 cr shares, means will infuse nearly 225 cr in BAL Mktcap of which is 500 cr. Out of it, 1.75 cr warrants will convert in equity in 2019*

If Ferro Chrome prices are going to remain soft, then promoter wouldn't commit funds for 2 years from now at cmp and would have waited for the fall. It clearly indicates that Ferro Chrome prices will surpass recent high because steel production continues to rise whereas there are no new chrome Ore mines. BAL will use these funds for capacity additions. Co has already started work for underground mining of Ore

As per our analysis, considering orders under execution,  *Balasore can post NP of 40+ cr for Q1*.

*For FY18 Balasore can achieve NP of MINIMUM 120 cr*

_EPS for FY18 can be 13.50_. Stock is trading at just 4.82xFY18Eeps.

We expect stock can be 85 next week and 120-140  in 6-9 months

An excellent Buy