Taking a call on MOIL, there are two positive triggers that we feel. The company will clock a sale of Rs 1,080 crore for next fiscal that is our conservative projection, while the market consensus is around Rs 1,125 crore. The company is roughly working with a net profit margin of almost 48 percent on adjusted basis, if I adjust with the cash. So that 48 percent roughly gives you a profit after tax (PAT) of Rs 500 crore and the current market cap is Rs 4,200 crore.
“The next important trigger is the cash that this particular company is holding, which is again over Rs 80 to Rs 100 per share that is again going to give you a comfortable valuation.”
“The third important aspect is the dividend yield that the company is available at; 3 percent with almost debt-free status for this particular company on cash adjusted basis. This is fairly lucrative.”
I am forecasting a bottom-out for the Manganese and on ferrous space somewhere in that April May season and that will actually see lot of momentum for price up shift. What is interesting for playing this non-ferrous or ferrous space is that a rupee change into the top line significantly adds to the bottom-line because there is expansion in terms of operating profit margin.
MOIL is one pick where i feel there is hardly any downside, not even 10 percent from current levels given good cash levels. And strong earning even on the bad phase the entire sector is going through but if there is an upward shift that is what we had projected we feel the stock would stabilize around Rs 325 levels. Stabilization doesn’t mean that it will stop around that level.I have a target of Rs 370-380 but i am taking a conservative call right now given that it is a projection from my quant model and i feel this will definitely hog limelight because of news flow that is coming in MOIL.
“Recently only the company announced that it has applied for eight coal blocks which was given by the government of India mandate, which is again a positive for this particular company. So given all this fundamental developments for the company we feel this is on risk reward front very attractively positioned even if the projections work against few of our models.”
Financially :
“MOIL sales at Rs 2.28bn (-4.7%YoY/-0.5%QoQ) were lower than estimate of Rs 2.45bn primarily due to lower than expected realisations which fell by 1.4%YoY/ 12.7%QoQ to 239kt (DCe: Rs 8055 per tonne). Realizations were lower as company sold 74.1kt of fines (25% of sales) vs 36kt in Q2FY13 (15% of sales). Sales volumes fell by 0.9%YoY to 282kt whereas production rose by 10.5%YoY to 315kt.Ferro manganese sales declined by 53%YoY/37%QoQ to Rs 108mn due to weak demand whereas wind power sales fell by 71.8%QoQ to Rs 16mn due to seasonality.”
“EBITDA rose by 4.9%YoY/6.2%QoQ to Rs 1.14bn (DCe: Rs 1.16bn). Margins improved to 50.3% (460bpsYoY/320bps QoQ) due to higher realisations. Other income increased by 28.6%YoY/8.9%QoQ to Rs 644mn. PAT improved by 11.8%YoY/4.4%QoQ to Rs 1.13bn (DCe: Rs 1.05mn) due to higher than expected other income. MOIL has reduced the prices for Q4FY13 given the subdued demand and fall in international prices. MOIL prices are currently at 5% premium to the landed prices of the imported ore. It has maintained its volume targets for the year. BHP has maintained the prices for Q4CY12 globally. We have largely maintain our estimates for FY13E and FY14E and introduce FY15E. MOIL is currently trading at 3.5xFY13EV/EBITDA and 3xFY14EV/ EBITDA.
