MOIL - Analyst Meet Update Note for 1QFY13 - A C Choksi Share Brokers Private Limited

We attended the Analyst Meet of MOIL Ltd and met the Management of the company on 9th August, 2012. We maintain our BUY Rating on MOIL with a target of INR336.

Key takeaways from the Analyst Meet

- Evaluating 2-3 mining proposals from South Africa; looking at acquiring 0.5mt to 1mt opencast mines through a JV.

- SAIL and RINL JV for value-added production (capacity 163,500) is on, but would switch from ferro manganese to silico manganese alloy.

- Mn ore COP at $70-$75/tonne, internationally it is at $85-$90/Tonne.

- Capex for FY13 at INR2,080 mn. Capex of ongoing projects is at INR3445 mn.

- Capex for upcoming projects which are likely to be completed by the end of the 12th plan is INR5,510 mn.

- Current Mn ore prices are at par with landed cost of imported ore.

- Awaiting licence for 597.44 hectares in Maharashtra.

- Production guidance for 2QFY13 at 0.29 mt to 0.3 mt. Production to pick up from October, 12.

- Currently operates 2 beneficiation plants at Balaghat and Dongri, plans to add 1 more by FY17.

- Drilling improved from 4,800-5,000 mpa to 10,000 mpa.

1QFY13 Result Update

Sales volume improves due to demand uptick, realizations improves q-o-q

The Mn ore production for 1QFY13 was 247,276 Tonnes vs 239,527 Tonnes for 1QFY12, growth of 3.2%. It was down by ~21.6% q-o-q. The sales grew significantly by 42.6% y-o-y to 315,587t. The sequential growth was 5%. This was on the back of improved demand. Blended Realization for the June quarter grew by 9% q-o-q to INR6,852/T due to 5%-12.5% price increase done by the company. However, the realization was down y-o-y by 18.2%. Management has guided production for 2QFY13 at 0.29 mt to 0.3 mt and volumes of 1.15 mt in FY 13 and 1.20 mt in FY 14.

Net profit for the quarter declined y-o-y by 8.7% to INR994 mn. The profit was flat sequentially.

Basic and diluted EPS for 1QFY13 came in at INR5.92 as compared to INR6.48 for 4QFY12 and INR5.91 for 1QFY12. The EPS for FY12 was INR24.5.

The company's EBITDA for the quarter declined by 19.3%(y-o-y), however sequentially the EBITDA went up by 18.9% to INR1,023 mn.

The company reported an increase of 15.5%(y-o-y) and 20.3%(q-o-q) on its net sales for the quarter at INR2,426 mn. The q-o-q sales increase was on account of an increase in volumes and realizations both.

MOIL has increased prices of different grades of manganese ore in the range of 12.5% to 15% for the quarter July-Sep. 2012. The company had increased the prices of Mn ore for the June 2012 quarter by 5%-12.5% for the first time after 5 quarters of decline.

Valuation & Outlook

At CMP of INR269 and on a trailing twelve months basis , MOIL is trading at EV/EBITDA of 5.4 times, EV/Sales of 2.6 times and P/E of 10.9, P/S of 4.8 times.

MOIL has 32mt of reserves out of the country's 142mt of reserves, accounting for 23% of the country's proved reserves; 55% of its reserves has more than 40% Mn ore grade and 27% constitutes grade between 36% and 39.9%. Resources stands at 41.5 mt. It accounted for ~41% of the country's total output of 2.6 mt in FY12. As per the management, the demand of Mn ore in India has been around 4.2 MT in FY 12; with a production of 2.6 MT the country had to import the balance. Lower capacity utilization (50%-54%) at International ferro alloy plants coupled with higher inventory of Mn ore due to additional supply has put pressure on Mn ore prices. We however are witnessing improvement in prices for the past quarters and coming quarter as the prices have been revised upwards twice for June and September quarter of FY13, but we need to see how it pans out for the next few quarters for the trend to reverse. We maintain our buy rating on the stock with a target price of INR336 over next 18 months.

Source : Equity Bulls

Keywords