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Indian Metals & Ferro Alloys Ltd

The company has started commercial production at the 120MW power plant in FY14.

April 30, 2014 3:57 IST | India Infoline News Service
CMP Rs265
 

We met the management of Indian Metals and Ferro Alloys (IMFA) and also visited its manufacturing facility at Choudwar and mining operations at Mahagiri and Sukinda. IMFA is a leading integrated producer of ferro alloys spanning the value chain from mining to smelting. The company has 5 chrome ore mines with 21mn tons reserves, ferro alloy production capacity of 275,000tpa and power generation capacity of 258MW. The company, over the last one year, has set up a 120MW power plant and restarted its sixth furnace. IMFA is setting up infrastructure for underground mining operations at Mahagiri and expects to commission it by H2 FY15. Operations at Sukinda mines are suspended due to expiry of environmental clearance in Q4 FY14.

 

The company plans to increase its ferro alloy production by 20% yoy to 235,000 tons in FY15 and to 250,000 tons in FY16. We believe it would be difficult for the management to achieve the production targets set due to chrome ore’s restricted availability. Chrome ore availability would be curtailed as 1)the Sukinada mine is not operational, 2)Nuasahi mines lease would expire in November ’14 and 3)the rampup in underground mining at Mahagiri would take time. The company has also been allocated a coal block at Utkal ‘C’ in Angul, Odisha. The company has acquired land and has managed to receive all approvals till date. It is awaiting a Grant order and permission to mine from the State Government. At the CMP, IMFA is trading at 4.9X FY14E EV/EBIDTA, which is inline with its peers. We believe renewal of environmental clearance for Sukinda and execution of mining lease for coal are near term triggers for the company.


Financial summary

Y/e 31 Mar (Rs m)
FY11
FY12
FY13
FY14E
Revenues
10,405
11,925
12,733
14,013
yoy growth (%)
75.6
14.6
6.8
10.1
Operating profit
3,121
2,300
2,723
3,328
OPM (%)
30.0
19.3
21.4
23.8
Reported PAT
1,659
644
528
506
yoy growth (%)
304.4
(61.2)
(17.9)
(4.2)
EPS (Rs)
63.0
24.7
24.0
19.5
P/E (x)
4.2
10.7
11.0
13.6
EV/EBITDA (x)
4.1
6.6
5.8
4.9
Debt/Equity (x)
0.9
1.1
1.1
1.1
RoE (%)
25.9
8.7
7.6
5.8
RoCE (%)
24.2
11.8
11.1
10.6
Source: Company, India Infoline Research

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