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MOIL has over four decades of experience in manganese ore mining operations. It enjoys a near monopoly with a dominant 50% share in the domestic manganese production and is also one of the lowest cost producers of manganese ore in the world. MOIL was conferred with 'Mini Ratna' status by Government of India in FY08. A debt-free company, it has a healthy balance sheet with strong cash flows. As on H1 FY11, its cash balance stood at Rs17.6bn, which translates into Rs105 per share. It has witnessed revenue and PAT CAGR of 31% and 42% respectively, over the last four years. Presently, it is enjoying OPM of 70.3% and PAT margin of 52.1%. We recommend investors to 'SUBSCRIBE' the issue.

Domestic manganese ore industry to touch 4.1mn tpa

Rising ferro alloys production by steel manufacturers has been driving robust demand for manganese ore. Slower paced growth in development of mines has resulted in India being a net importer of manganese ore for the last three years. Domestic manganese ore demand is expected to witness a 9% CAGR and touch 4.1mn tpa by FY12E.

Largest producer of manganese ore; high quality reserve base

MOIL operates seven underground and three opencast mines located in strategic states like Maharashtra and Madhya Pradesh having access to 21.7mn tons of proved and probable reserves as on October 1 '10. In total, it has 69.5mn tons of measured, indicated and inferred reserves of manganese ore. Around 55% of its proved and probable manganese ore reserves have average manganese content of 40% or higher and 27.5% reserves contain 36-39.9% manganese content. By virtue of producing 1.09mn tons in FY10, it is the largest producer of manganese in India with a total domestic production share of 50%. It is also one of the lowest cost producers of manganese ore at US$17/ton as compared to a high of US$278 per ton incurred by Eurasian Natural Resources Corporation globally (CARE Research).

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At the upper end of the price band of Rs340-Rs375, MOIL would trade at P/E of 9.5x and EV/EBITDA of 5x based on H1 FY11 annualized financials. Given the robust demand outlook for manganese ore and company-specific positives, a) largest and lowest cost producer of manganese ore in India with 50% share b) strong balance sheet (debt free) and c) robust cash flows, we recommend 'Subscribe' to the issue.