MOIL (Q4 FY13)

India Infoline News Service | Mumbai |

We believe that the company’s costs have risen due to the hike in diesel prices. EBIDTA/ton of manganese ore declined from Rs4,060/ton in Q3 FY13 to Rs3,072/ton in Q4 FY13.

CMP Rs204, Target Rs258, Upside 26.2%
 
  • MOIL’s topline of Rs2.7bn was higher by 32.2% yoy and 16.9% qoq. It was also higher than our estimate of Rs2.5bn on the back of strong manganese sales volume. The company managed to sell 355,955 tons of manganese during the quarter, which is 18.4% higher on a yoy basis. This impact was marginally offset by a decline in blended realizations. Blended realizations were lower by 8.8% qoq to Rs6,994/ton against our expectation of a marginal decline. The decline has been a negative surprise for us as we had expected that an improvement in product mix would lead to only a marginal decline. We believe that the company has cut prices in Q4 FY13 due to the subdued demand scenario in the domestic market. Average lump prices were lower by 8.5% on a qoq basis.
  • Operating profit for the quarter increased by 27.2% yoy to Rs1.1bn, but was lower by 4.8% on a qoq basis. Operating profit was lower than our estimate of Rs1.3bn due to an increase in employee costs and a jump in other expenditure. Employee costs during the quarter increased by 27% qoq to Rs775mn from Rs610mn in Q3 FY13. Other expenditure too increased by 9% qoq and 27.2% qoq to Rs633mn. We believe that the company’s costs have risen due to the hike in diesel prices. EBIDTA/ton of manganese ore declined from Rs4,060/ton in Q3 FY13 to Rs3,072/ton in Q4 FY13.
Cost Analysis
  Q4 FY13  Q3 FY13 % qoq Q4 FY13  Q3 FY13
Material costs 16.3 17.7 (134) 18.9 (257)
Power and Fuel costs 26.2 34.6 (839) 28.5 (233)
Personnel Costs 15.3 17.1 (182) 14.3 96
Other overheads 19.6 19.9 (25) 21.1 (145)
Total costs 77.4 89.2 (1,179) 82.8 (539)







Source: Company, India Infoline Research
 
Quarterly volume and price trend
  Q4 FY13  Q3 FY13 % qoq Q4 FY13  Q3 FY13
Manganese production 337,222 315,000   7.1 314,000   7.4
Manganese sales 355,955 300,518   18.4 282,909   25.8
Blended realisations 6,994 6,279   11.4 7,668   (8.8)
Blended EBIDTA/ton 3,072 2,862   7.4 4,060   (24.3)







Source: Company, India Infoline Research
 
  • For the full year, manganese ore realizations stood at Rs7,467/ton, marginally lower on a yoy basis. The company’s ore production of 1.14mn tons was higher than its guidance of 1.12mn tons. Sales too were higher on for the year at 1.19mn tons as it managed to liquidate some inventory. We are negatively surprised by the huge jump in debtor days. Debtor days increased from 40 in FY12 to 109 by the end of FY13. We believe this would be due to the company’s push to increase sales in Q4 FY13.
  • We have lowered our FY14 and FY15 manganese ore realizations after the weak set of numbers in Q4 FY13. We now expect blended realizations to decline by 4% against our previous estimate of 2% increase in FY14. We now expect earnings to decline in FY14 and than improve in FY15 on the back of a revival in the steel industry. At the end of FY13, the company had cash reserves of Rs22.8bn, accounting for 66% of current market cap. We expect the company’s cash reserves to increase to Rs29bn in FY15 (84% of current Mcap) as we don’t expect the company to incur any major capex. MOIL is currently trading at 2.2x FY14E 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 4.5x FY14E EV/EBIDTA and arrive at a revised 9-month price target of Rs258. We maintain our BUY recommendation on MOIL with a 26% upside from current levels.
Results table
(Rs m) Q4 FY13  Q3 FY13 % qoq Q4 FY12 % yoy
Net sales 2,668 2,016 32.3 2,283 16.9
Material costs (167) (18) 832.6 57 -
Personnel costs (775) (628) 23.4 (610) 27.0
Other overheads (633) (510) 24.0 (581) 9.0
Operating profit 1,094 860 27.2 1,149 (4.8)
OPM (%) 41.0 42.7 (166) bps 50.3 (933) bps
Depreciation (89) (85) 4.2 (84) 5.2
Other income 602 628 (4.2) 640 (6.0)
PBT 1,607 1,403 14.5 1,705 (5.8)
Tax (506) (410) 23.4 (569) (11.0)
Effective tax rate (%) 31.5 29.2   33.4  
Adjusted PAT 1,101 993 10.8 1,136 (3.1)
Adj. PAT margin (%) 41.3 49.3 (801) bps 49.8 (851) bps
Reported PAT 1,101 993 10.8 1,136 (3.1)
Ann. EPS (Rs) 26.2 23.7 10.8 27.0 (3.1)
Source: Company, India Infoline Research
 
Financial summary
Y/e 31 Mar (Rs mn) FY12 FY13E FY14E FY15E
Revenues 8,996 9,671 8,887 9,190
yoy growth (%) (21.1) 7.5 (8.1) 3.4
Operating profit 4,332 4,352 3,971 4,007
OPM (%) 48.2 45.0 44.7 43.6
Pre-exceptional PAT 4,108 4,324 4,289 4,572
Reported PAT 4,108
BSE 228.60 [4.10] ([1.76]%)
NSE 229.00 [3.75] ([1.61]%)

***Note: This is a NSE Chart

 

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