Aug 18, 2008|
TRF Limited: A brief overview
Incorporated in 1962, TRF (erstwhile Tata Robins Fraser) is primarily engaged in the business of providing bulk mineral handling products and projects, catering to customers from the steel, power and port sectors. It provides services such as designing, engineering, fabrication, erection and testing of bulk material handling equipment and systems. The company is also involved in supplying equipment and services to the port and yard segment and EPC (engineering, procurement and construction) services to power companies for setting up medium-sized plants. In FY08, TRF acquired 51% stake in York Transport Equipment, a Singapore-based company, engaged in manufacturing of trailer axels, assembling suspension kits and distributing a full range of truck/trailer components. It has a presence in 27 countries. TRF's headquarters are based out of Jamshedpur and Tata Steel, being its promoter, has 34.8% stake in the company. TRF provides majority of the products and services in association with international partners.
The company's business is broadly divided into two segments - Projects & services and products & services. In this article we shall cover a brief overview of the business.
Projects & services
Under this arm, TRF offers businesses such as the EPC and EPCM (engineering, procurement and construction management), bulk mineral handling systems, steel plants systems and the coal benefication system. The EPCM division of TRF caters to the customers in the infrastructure, power, metals and coal washeries sectors. TRF designs and supplies bulk mineral handling systems on a turnkey basis. These systems include everything from unloading systems to dispatch loading systems, and other intermediate systems like crushing, handling and stacking systems, among others. The company's bulk mineral handling division provides these services to a variety of sectors such as the power, cement
, steel, port, mining - coal and ferrous, dam construction, road construction and the process industry. The other two divisions, coal benefication and steel plants systems, as the name suggests, offer services to companies in the coal and steel sectors.
Products & services
Apart from the projects segment, TRF also offers equipment required for individual uses to a variety of sectors. These include bulk mineral handling equipment and equipment needed in ports & yards and steel plants. The port & yard equipment division of TRF supplies specialised handling equipment for bulk minerals, catering to the power, steel and process plants, marine terminals and container terminals. TRF also manufactures and installs stamping-charging-pushing (used for the process of carbonisation) equipment for coke ovens that is equipment primarily used in steel plants. However, the company also provides the conventional carbonisation technology.
TRF's new subsidiary, York Transport Equipment is present in the business of manufacturing of axles and distributing trailer undergears and trailer components. TRF has also planned to establish a domestic facility, which is likely to be set up during 2009. This facility would cater to the domestic segment, while its Singapore unit would cater to the global market.
Segmental revenues over the years
As we can see from the above charts, TRF had been mainly focused towards its projects and services division in the past. Its share in total revenues (excluding inter-segment revenues) in FY03 was 73%, which increased to 82% in FY08. However, in order to de-risk its business from the cyclical nature of investments, the company is planning to shift its focus towards the products segments.
Also read - TRF's 1QFY09 result analysis
TRF's peer group consists of domestic players such as Elecon Engineering (EEL), which is mainly focused on providing mineral handling equipment, while TRF's revenues are a mix of products and projects. In FY08, EEL earned revenues of Rs 3 bn from its material handling business (42% of its total revenues) as compared to TRF's total revenues of Rs 3.6 bn (standalone).
What to expect?
At the current price of Rs 713, the stock is trading at a multiple of 12.6 times its trailing 12 months earnings. TRF's stock has been one of the biggest losers from the engineering and capital goods space in the recent market meltdown. From the high of Rs 2,100 made in December 2007, the stock is down almost 66%. Broadly, with the ongoing capex in power and other infrastructure sectors, the potential for TRF's products and services is significant. The company however faces risks of execution and rising material costs, as was seen from the pressure on profitability that it recorded in the recently concluded quarter. We shall have a more concrete view on the stock post a research meeting with the management.
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