Mishra Dhatu Nigam Ltd - IPO Note - Avoid - Hem Securities

Mishra Dhatu Nigam Ltd is one of the leading manufacturers of special steels, Superalloys and only manufacturer of titanium alloys in India. These are high value products which cater to niche end user segments such as defence, space and power. Company manufactures unique combinations of metal and alloys. Co manufacture special steels like martensitic steel, ultra high strength steel, austenitic steel and precipitation hardening steel. Co manufacture three varieties of Superalloys - nickel base, iron base and cobalt base. Co also manufacture varieties of titanium alloys. With the growth of business and operations, co have achieved the status of a Mini Ratna, Category-I company in 2009.

Most advanced and unique facilities

Company is the only facility in India to carry out vacuum based melting and refining through world class vacuum melting furnace such as vacuum induction melting, vacuum arc remelting, vacuum degassing / vacuum oxygen decarburisation, electro slag remelting and electron- beam melting. It enables company to venture new markets with innovative and advanced products.

Strong long term customer relationships

Co have a strong and an established relationship with its customers. Co have partnered with many of its key customers in the product development process, enabling co's products to meet the exact specifications provided by the customers and to ensure repeat orders. Company undertakes an in house survey for customer satisfaction. The results of customer satisfaction index during 2012 to 2015 is more than 3.5 on the scale of 1 to 5. As on September 30, 2017, customer funded assets constitute Rs. 660 million out of the total gross block of company of Rs. 3,653.94 million.

Valuation

Co is bringing the issue at p/e multiple of almost 29 on post issue H1FY18 annualized eps at price band of Rs 87-90/share. Although co has most advanced and unique facilities & capability to manufacture wide range of advanced product but weak order book size of Rs 517 Cr against strong topline in FY16 & FY17 doesn't infuse optimisim in company. Hence, we recommend "Avoid" on issue.

Source : Equity Bulls

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