Breaking The Market Trend: Aditya Ultra Steel Clocks 8% on NSE SME

NIFTY50 and the SENSEX have been plummeting for over a week. The domestic stock market is struggling to stay rooted amidst the selling pressure. Consequently, the indices have slipped into one of the steepest correction phases in the past four years, which led to a fall of around 10%. 

Despite the weak global cues and the declining broader markets, one NSE SME stock grew its share price. Aditya Ultra Steel Limited, a stock listed on NSE SME, rose 8% and marked a rising trend. Read further to know the reasons behind the stock’s resilient positive returns. 

Overview of Aditya Ultra Steel Limited:

Aditya Ultra Steel Pvt. Ltd., part of the Aditya Group of Companies, specializes in manufacturing TMT bars for the construction and infrastructure industries. Incorporated in July 2011 as a Private Limited Company, it is registered in Gujarat at Dadra and Nagar Haveli. The company produces rolled steel products, primarily TMT bars, under the trusted Kamdhenu brand. These bars are designed for construction and infrastructure development projects, ensuring quality and durability.  

Their manufacturing plant is located in Wankaner, Gujarat. It features modern facilities, including advanced testing laboratories, and benefits from excellent transport connectivity to streamline operations. Aditya Ultra Steel focuses on the B2B market, delivering TMT bars tailored to the needs of various construction and infrastructure ventures.

The company manufactures TMT bars under a retail license agreement with the Kamdhenu brand, serving Gujarat’s Kutch and Saurashtra regions. It sells these bars through a distribution network of 73 dealers. To streamline deliveries, the company owns a fleet of 23 vehicles. A significant portion of its revenue, 57%, comes from its top customer, while 98.5% of its total income is generated from Gujarat.

Revenue and Profit Trends of Aditya Ultra Steel Limited:

Due to the expansion of the construction industry, the demand for TMT bars and the need for steel in different infra projects has increased gradually. The TMT bar market is set to see steady growth. Between 2022 and 2027, it is expected to expand at a CAGR of 4.34%. Looking ahead to 2033, the market revenue is predicted to grow faster, with a CAGR of 9.6%. 

The growth prospects and positioning of Aditya Ultra Steel Limited led to the company’s consistent rise in revenue and profits. In 2023-24, the company’s total income rose by 10.73% to Rs.588.59 crore from FY2023’s income of Rs.531.57 crore. 

Aditya Ultra Steel also clocked a profit of Rs.7.68 crore, almost double the net profit (after tax) of FY2023, Rs.3.7 crore. Over the past five years, the company’s profit trend has been as shown-

Apart from its steady finances, the company also came into the limelight due to its recently launched IPO on 16th September 2024 as a part of its expansion plans. Aditya Ultra Steel launched its SME IPO in September 2024 to raise Rs.45.88 crore for expansion, working capital, and corporate needs. The company was listed on the NSE SME on 16th September, with shares priced between Rs.59 and Rs.62. It made a strong debut, listing at Rs.69.60, about 13% higher than its issue price.  

On the same day, the stock touched a peak of Rs.72. However, by November 13, it hit an all-time low of Rs.50. Shortly after, the stock showed some recovery, gaining 8% on November 18, 2024.

Factors Contributing To The Share Price Growth:

1. Aditya Ultra Steel Limited posted good financials for the half-year ending September 2024. The company maintained strong growth during the first half of the financial year 2024-25 (H1FY25). In a press release on November 16, the company reported revenue of Rs.312.39 crore H1FY25. EBITDA stood at Rs.10.50 crore, while net profit reached Rs.5.20 crore.  
2. The company announced in its press release that it is focusing on expansion. This initiative focuses on increasing production capacity, improving operational efficiency, and adopting sustainable practices. The company’s September IPO was a part of this vision.
3. The company is setting up a 5 MW solar power plant in Jasdan, Rajkot, Gujarat. This project, worth Rs.15.35 crore, will have a capacity of 5,000 KWP. It aims to meet the company’s energy needs while promoting sustainability.
4. The company partnered with Maheshwar Ispat Private Limited to manufacture TMT bars from June 2023. In FY24, Maheshwar Ispat produced 10,866 MT of TMT bars, which made up 11.28% of the company’s total production.

Bottomline:

India’s steel and TMT market is growing, driven by rising demand for steel, the advantages of TMT bars, and the expanding global industry. Aditya Ultra Steel Limited is in a strong position to benefit from this growth and plans to expand in the coming years. However, as with any listed company, investing in it comes with risks, especially since it is a small-cap company. 

So, if you’re considering investing in Aditya Ultra Steel Limited, make sure to do thorough research on both the industry and the company’s fundamentals before making any decisions.

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