MOIL (Q1 FY14)

India Infoline News Service | Mumbai |

MOIL reported a 1.5% yoy decline in topline to Rs2.4bn, lower than our estimate of Rs2.5bn. The underperformance in topline was due to weaker than expected sales volume.

CMP Rs192, Target Rs245, Upside 28.9%

  • MOIL reported a 1.5% yoy decline in topline to Rs2.4bn, lower than our estimate of Rs2.5bn. The underperformance in topline was due to weaker than expected sales volume. The company managed to sell 258,000 tons of manganese ore against our expectation of 295,000 tons. However, the underperformance was curtailed by strong realizations. Average realizations for the quarter stood at Rs8,650/ton against Rs6,994/ton in Q4 FY13 and Rs6,940/ton in Q1 FY13. The jump in realizations was due to an increase in share of high grade ore. The company expects manganese ore prices to be around current levels in the near term. Manganese ore production was higher by 2.2% yoy at 252,164 tons and the company expects to complete the year at 1.15mn tons.
  • Operating profit for the quarter jumped 14% yoy to Rs1.2bn, marginally lower than our estimate. Employee costs remained high at 28% of sales at Rs672mn, higher than our expectation. EBIDTA/ton of manganese ore increased sharply from Rs3,072/ton in Q4 FY13 and Rs3,240/ton in Q1 FY13 to Rs4,519/ton in Q1 FY14. The increase was largely due to the change in product mix. Costs remained high due to increase in diesel prices.
Cost Analysis
 (As a % of sales)
Q1 FY14
 Q1 FY13
% yoy
Q4 FY13
 % qoq
Material costs
2.9
13.9
(1,097)
6.2
(329)
Personnel Costs
28.1
24.1
409
29.0
(90)
Other overheads
20.1
19.9
23
23.7
(363)
Total costs
51.2
57.8
(665)
59.0
(782)
Source: Company, India Infoline Research

Quarterly volume and price trend
 
Q1 FY14
 Q1 FY13
% yoy
Q4 FY13
 % qoq
Manganese production
252,164
247,276
2.0
337,222
(25.2)
Manganese sales
258,000
315,587
(18.2)
355,955
(27.5)
Blended realisations
8,650
6,940
24.6
6,994
23.7
Blended EBIDTA/ton
4,519
3,240
39.5
3,072
47.1
Source: Company, India Infoline Research
  • We were negatively surprised by the huge jump in debtor days in Q4 FY13. Debtor days increased from 40 in FY12 to 109 by the end of FY13. The company has indicated that debtors have declined from Rs2.9bn to Rs1.9bn and expects it to further decline to Rs1bn by the end of FY14.

  • MOIL has managed to increase its realizations in a weak market in Q1 FY14. We are positively surprised by the ability of the company to hold prices. The management has mentioned that market share in FY13 increased to 50% from 42% in FY12. It expects to hold prices in the near term. Management has guided for a capex estimate of Rs2bn for FY14 and Rs4bn in FY15. At the end of Q1 FY14, the company had cash reserves of Rs25.3bn, accounting for 78% of current market cap. We expect the company’s cash reserves to increase to Rs27bn in FY15 (84% of current Mcap) even after incurring the above mentioned capex. MOIL is currently trading at 1.3x FY15E EV/EBIDTA, which is at huge discount to its historical average of 5.8x and also to its international peers. We value the company at 4x FY15E EV/EBIDTA and arrive at a revised 9-month price target of Rs245. We maintain our BUY recommendation on MOIL with a 29% upside from current levels.
Results table
(Rs m)
Q1 FY14
 Q1 FY13
% yoy
Q4 FY13
% qoq
Net sales
2,389
2,426
(1.5)
2,668
(10.5)
Material costs
(70)
(338)
(79.1)
(167)
(57.7)
Personnel costs
(672)
(584)
15.2
(775)
(13.2)
BSE 229.95 4.55 (2.02%)
NSE 230.40 4.65 (2.06%)

***Note: This is a NSE Chart

 

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