Stock of Week - 05 August 2008

GUJ NRE FOR SHORT – MEDIUM TERM
Equity – 337.09Cr
BSE Code – 512579
CMP – 108.9
BUY GUJ NRE @ 110 – 112 TGT 120 - 122

Gujarat NRE Coke Limited, the largest non-captive manufacturer of Low Ash Metallurgical Coke in India, has been a profit making organization since its inception in 1986.

Production
The Company’s coke manufacturing facility located at Khambhalia, Jamnagar, started with 3 chimneys and a production capacity of 0.1 million tonnes per annum (TPA) in 1994-95. Since then, the company has added 8 chimneys to the unit. At present, it is operating with 11 chimneys and an installed capacity of 0.324 million TPA, it has also set up a Greenfield coke plant at Bhachau with an installed capacity of 0.324 million TPA which has become operational since March 2004. The Company has also promoted Bharat NRE Coke Limited, which has set up a coke unit at Dharwad, Karnataka with a capacity of 3.24 lac TPA, taking the cumulative coke capacity of the group to over 1 million TPA. In addition, it has invested in wind farms total power generation capacity of 27.5MW close to its plant site to get low cost power and save precious natural resources.

The Company has set up a steel plant in Bhachau, Gujarat for the manufacture of steel rebars.

Mining

The company has also acquired a coking coal mine in Australia, NRE No. 1 Colliery, having coking Coal researve of above 300million MT located near Sydney, in December 2004 through its subsidiary, Gujarat NRE Australia Pty. Ltd. (now Gujarat NRE Minerals Limited) thus creating the first industry instance in the country. In July 2005, it acquired the coal mining leases comprising the whole of old Avondale Colliery and part of Huntley Colliery in the Southern Coalfields of New South Wales, Australia, through its Australian joint venture company, Gujarat NRE FCGL Pty Ltd. The colliery, known as NRE Avondale Colliery, having coking coal reserve of above 96million MT given its vicinity to NRE No. 1 Colliery, has the potential benefits of ownership in two nearby collieries.

Mineral Resources
The company had acquired an 18.63 per cent stake Zelos Resources NL, an Australian mining company listed in the Australian Stock Exchange (ASX) having exploration license in coal, iron ore and other base metals like gold, platinum etc. The acquisition has made Gujarat NRE Coke the single largest shareholder in the Australian mining company and help gain further exposure to the minerals industry in Australia. Later on, the operation of "NRE Avondale Colliery" was transfered to Zelos Resources NL in pursuence of Shares & Opthus resulting into the NRE Group become the largest shareholders presently holding above 84%. The name of Zelos was subsequently changed to Gujarat NRE Resources NL the first Australian company of the group listed in ASX. It has made 19.9 per cent investment in Sydney based Rey Resources Limited which gives it the exploration access to a previously unexplored area of about 4000 sq kms in
Western Australia. The wholly owned subsidiaries of Rey Resources Limited are also scouting for copper and gold in South America, which too will add to the NRE basket of resources. Such partnerships will strengthen the position of the Company in terms of long-term coal supply and market positioning in commodity market. The company also has a strategic investment, of over 12 per cent equity interest in Plouton Resources Limited(also listed in ASX). The investment would be directed towards securing various exploration licences and exploratory work in Australia, targeting gold, silver, copper, iron ore and possibly uranium amongst other minerals.

The company with startegic investment of around 11% also executed coal-off agreement with Pike River Cola Ltd, the producer of Ultra Low-ash Metallargical Coke, for supply of 0.4million tonnes per annum. That coal having about 1% ash content can be termed as blending sweatner.

Sales and NP for year ended 07 – 08 were 874.4Cr & 169.5Cr. Sales and NP for latest Quarter 380.6Cr & 64.2Cr.

On YOY basis NP has increased by 205% & based on quarter latest its increased by 26%.