MOIL - 3QFY17 Result Update - Stellar Performance to Continue; Upgrade to BUY - Reliance Securities

MOIL has reported enthusiastic performance in 3QFY17, topping ours as well as street estimates. Its sales volumes zoomed by 154% YoY and 12% QoQ to 348,000 tonne (vs. our estimate of 325,000 tonne), while blended realization surged by 64% YoY and 61% QoQ to Rs9,394/tonne (vs. our estimate of Rs7,500/tonne). Notably, MOIL liquidated substantial inventory in 3QFY17 as production at 272,000 lagged sales by a wide margin. EBITDA rose by 797% YoY to Rs1.37bn (Rs24mn in 2QFY17), beating our estimate of Rs835mn, largely due to higher realization. Its adjusted PAT increased by 99% YoY and 315% QoQ to at Rs1.1bn (vs. our estimate Rs953mn). Looking ahead, MOIL is expected to sustain robust performance at least till FY18E which provides headroom for potential upside despite the recent run-up. Hence, we upgrade our recommendation on the stock to BUY from HOLD with an upwardly revised Target Price of Rs409.

Stronger Prices & Higher Volume Take EBITDA to Multi-Year Quarterly High

Sales volumes zoomed by 154% YoY and 12% QoQ to 348,000 tonne. The global manganese ore prices remained under pressure in CY15 and 1HCY16 due to oversupply, but measures i.e. downsizing production and planned shut-down of high-cost mines aided the prices to stabilize. Further, increased demand in China and improved sentiment also helped manganese ore prices, which started recovering significantly. Global manganese ore prices have almost trebled since Aug'16. Due to strong demand in China, overseas offers for India fell sharply which helped the domestic prices benefiting MOIL, being the supplier of 50% of India's total production - in particular.

Outlook & Valuation

MOIL reported exceptionally good quarterly performance with improvement in volumes as well as realization, which we expect to remain firm owing to higher domestic steel production and sharp rally in global manganese prices. We have tweaked our numbers to factor in the changing scenario. We expect strong cash flow generation to continue due to low capex. Net cash per share slated to rise to Rs190/share (~53% of current mkt cap) by FY18E (after considering Rs 8.63bn incurred towards share buy-back). MOIL is expected to sustain robust performance at least till FY18E which provides headroom for potential upside despite the recent run-up. Hence, we upgrade our recommendation on the stock to BUY from HOLD with an upwardly revised Target Price of Rs409.

Shares of MOIL LTD. was last trading in BSE at Rs.360.5 as compared to the previous close of Rs. 356.2. The total number of shares traded during the day was 54041 in over 1607 trades.

The stock hit an intraday high of Rs. 363 and intraday low of 356.85. The net turnover during the day was Rs. 19448957.

Source : Equity Bulls

Keywords