Usha Martin surges 13% on heavy volumes; stock nears record high

The counter saw combined trading volumes of nearly 3 million shares on the BSE and NSE in morning trades so far.

Shares of Usha Martin surged 13 per cent to Rs 161.95 on the BSE in Monday’s intra-day trade backed by heavy volumes. The stock of iron & steel company now trades close to its record high of Rs 164.65, touched on April 26, 2022.

At 10:16 AM; Usha Martin quoted 11 per cent higher at Rs 159.85, as compared to 0.69 per cent rise in the S&P BSE Sensex. The counter witnessed huge trading volumes, with a combined 2.87 million shares changing hands on the NSE and BSE so far. On an average a combined sub-3 million shares were traded on the bourses on daily basis.

On increase in volume, Usha Martin, on December 20, clarified that there is no material event and/ or information which is not in the public domain, which could have a bearing on the price and volume behavior of our traded scrip.

In the past one month, the stock has rallied 17 per cent, as against 3 per cent decline in the Sensex. Further, in past three months, it has soared 32 per cent, as compared to 6 per cent rise in the benchmark index.

Usha Martin is a leading global manufacturer of steel wire ropes and is also engaged in the manufacturing of wires, LRPC strands, prestressing machines & accessories and optical fiber cables. Usha Martin’s wire rope manufacturing facilities in Ranchi, Hoshiarpur, Dubai, Bangkok, and UK produce the widest range of wire ropes that find application in various industries across the world.

For the first half (April-September) of current financial year 2022-23 (H1FY23), Usha Martin reported 39.3 per cent year on year (YoY) jump in consolidated net profit at Rs 161.20 crore. Revenue of the company during the period grew 30.6 per cent YoY at Rs 1,579 crore. Higher realizations and better volumes assisted revenue growth during the period. Earnings before interest, taxes, depreciation, and amortization (ebitda) margin, however, contracted 76 bps to 15.5 per cent from 16.3 per cent in H1FY22.

High inflation, monetary tightening by Fed and ECB, energy shortages, Ukraine-Russia war, strengthening USD are headwinds for global growth, the management said, it added, government’s continued focus on infrastructure, strong growth in Auto industry to drive domestic demand, global slowdown and geo-political disruptions pose major threat.

The company, post divestment of its Steel Business Undertaking, has improved with renewed vigor with its focus on capability building, debottlenecking of constraints and increase in productivity of key products to remain agile and competitive.

In order to continue to be sustainable, resilient and future ready, the company is preparing for plans for augmenting capacity and capability building. There is focused effort for planned capability building by adding new machines for producing high end ropes and value-added products. Further, the plans for addition of capacity would focus mainly upon debottlenecking constraint areas and increase productivity of key products.

With these plans in hand, the company remains confident of making deeper inroads into international markets with high contributory products. It is also expected that with steady infrastructure spending by the Indian government, specialty products used in construction and infrastructural sector may become one of the key growth drivers for the company, Usha Martin said in its FY22 annual report.

Technical View

Bias: Positive

Target: Rs 173

Support: Rs 152

The price-to-moving averages action indicates a positive bias for Usha Martin, as the stock has been trading above its key moving averages for the last six trading sessions.

Further, the shorter-term moving averages - 20-DMA and 50-DMA have crossed the longer-term 100-DMA in the very recent trading sessions, thus adding more strength to the current bias.

On Monday, the stock surged past the higher-end of the Bollinger Bands on the daily chart - indicating a bullish bias for the stock as long as it sustains above Rs 152. 

Similarly, on the weekly chart, apart from breaking above the Bollinger Bands the stock has also seen a super trend line breakout. As per the monthly chart, the stock can test Rs 173 on the upside.

(With inputs from Rex Cano)