Should I hold Lanco Inds?

Query: I bought 750 shares of Lanco Indus at Rs.71. Pls suggest its short term target? Should I hold the scrip or book profits? Gopal

Thebullishtrends: Lanco Inds share price closed on Friday at Rs.86. In the year 1991 Lanco Industries Ltd established by Lanco Group of Companies to manufacture Pig Iron using Korf (German) technology and Cement. The unit is located at Rachagunneri Village on Tirupathi - /Srikalahasthi road which is about 30 kms. from Tirupathi and 10 kms. from Srikalahasthi. The installed capacity of Pig Iron was 90,000 TPA and with similar capacity 90,000 TPA for cement.

Due to the poor demand and other reasons, the operations of the cement unit of the Company was suspended and the unit was reengineered for producing a different product mix having potential in south India.As a measure of forward integration project for adding value to the Pig Iron manufactured by the Company, LIL floated an another company named Lanco Kalahasthi Castings Limited (LKCL) on 4 th March 1997 to manufacture iron castings and spun pipes in the same campus of the Company with an annual capacity of 40,000 TPA and 35,700 TPA respectively. Accordingly, LIL had an arrangement with LKCL for supply of molten iron and Pig Iron to LKCL, being a value added product, as such iron pipes manufactured by LKCL offered better returns.However, due to falling Pig Iron prices, increase additional capacity in the industry, competition and the technical & financial assistance, the operations of both LIL and LKCL were effected and the Company was exploring financial and technical strategic alliance with Indian / Foreign Partner.

Electrosteel castings another major DI Pipe producer owns 57 % of Lanco’s Rs. 39.7 crore equity. Market cap. of Lanco is just about Rs. 160 crores. Over the last 3 years Lanco has installed 150,000 tonnes capacity Coke Oven Plant and 12 MW Power Plant based on Waste Heat Recovery from Coke Oven Plant. Replacement costs of all its plants excluding Captive Iron Ore mines will be above Rs. 500 Crores.

Lanco Industries tunrnover slighthly fell down by Rs. 4.57 Cr to Rs.95.94 Cr for Q2 but at the same time time company improved its operating profit margins compared to previous quarters. Hold this scrip.