Subscribe to MOIL IPO - Attractive Valuation - Emkay Global

MOIL is the largest manganese ore producer in India, contributing 50% of the total domestic production. Globally it ranks fifth among all the manganese producers.

The company is among the lowest cost manganese ore producers with an EBITDA margin of ~70% during H1FY11. It has ~22 mt of good quality manganese ore reserves.

MOIL is a debt free company with net cash of Rs 105 per share during H1FY11. The company has a planned capex of Rs 7680 million to ramp up its capacity to 1.5 mtpa by FY16.

At the upper band of Rs 375, the stock looks attractively valued with potential upside of 40% on 6x FY12E EV/ EBITDA basis - Recommend SUBSCRIBE.

Company description

MOIL Ltd is the largest manganese ore producing company in India and ranks fifth in the world. In 1896, a British company by the name of Central Provinces Prospecting Syndicate was set up. In 1924, it changed its name to the Central Provinces Manganese Ore Company Limited (CPMO). Pursuant to an agreement between the Government of India (GoI) and CPMO, a company in the name of Manganese Ore (India) Ltd was incorporated on June 22, 1962, with 51% capital held between the GoI and the State Governments of Maharashtra and Madhya Pradesh and the balance 49% by CPMO. CPMO sold all its shareholding and certain other properties and assets to GoI in 1977 and subsequently, GoI transferred all its assets to the company and it became a 100% Government Company under the administrative control of the Ministry of Steel. Finally in August 17, 2010 the name of the company was changed to MOIL limited. The product portfolio of MOIL consists of manganese ore (1.1 mtpa capcity), high carbon ferro manganese (HCFM, 10000 tpa capacity), electrolytic manganese di- oxide (EMD, 1000 tpa capacity) and wind power (20 MW capacity).

Valuation: At the higher band of Rs 375/ share the stock discounts its FY12E earnings by 8x and EV/ EBITDA by 3.5x. Considering its dominance in business with virtually no competitor and strong growth prospect of domestic steel industry, our fair value for the stock comes at Rs 526/ share by giving a multiple of 6x to its FY12E EV/ EBITDA, which suggests a gain of 40% on the upper band of the offer price. We recommend SUBSCRIBE to the issue.

Source : Equity Bulls

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