MOIL - FY2012 Result Update - Angel Broking

For FY2012, MOIL's net sales and EBITDA decreased by 21.1% and 43.5% yoy, respectively, mainly due to a steep decline in manganese ore prices. We recommend a Neutral rating on the stock.

Lower realization leads to a decline in the top line: During FY2012, MOIL's net sales decreased by 21.1% yoy to Rs.900cr (slightly below our estimate of Rs.972cr) mainly on account of the decline in average realization (down 33% yoy and 21.4% qoq to Rs.6,279/tonne) because of the increase in the proportion of fines in comparison to ferro-grade in the mix of manganese ore sales.

Margin shrinks due to lower realization: For FY2012, the company's EBITDA decreased by 43.5% yoy to Rs.433cr. The company's EBITDA margin dipped by 1,910bp yoy to 48.2% as the company slashed its prices by 5-12% during the year. Other income, however, increased by 39.7% yoy to Rs.203cr. Consequently, net profit decreased by 30.1% yoy to Rs.411cr, in-line with our estimate of Rs.408cr.

Outlook and valuation: Manganese ore prices have gradually slumped by over 40.0% since January 2011 on the back of oversupply in global markets. Although MOIL has raised manganese ore prices modestly during 1QFY2013, we do not foresee any meaningful rise in manganese ore prices in the coming year. Hence, we recommend Neutral on the stock.

Source : Equity Bulls

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