Nov 15, 2011, 04.31 PM | Source: Moneycontrol.com
CRISIL Research has come out with its report on Maithan Alloys. The research firm has maintained the fundamental grade of 3/5 to the company in its November 14, 2011 report.
, CRISIL Research |
Maithan Alloys Ltd’s (Maithan’s) revenues and earnings were in line with CRISIL Research’s expectations. Decline in revenues coupled with higher operating expenses dented margins and led to decline in profits. We may revisit our estimates post our interaction with the management. We maintain the fundamental grade of 3/5.
Q2FY12 result analysis (standalone)
• Q2 net sales declined 11.5% y-o-y (up 12.9% q-o-q) to Rs 1,457 mn The decline in revenue was mainly due to lower sales volume and per tonne realisations.
• EBITDA margin contracted by 233 bps y-o-y (down 17 bps q-o-q) to 14.4% due to increase in power and employee costs. Power cost increased by 33% y-o-y (up 18.6% q-o-q) and constituted 23% of sales, while Employee cost increased by 35.8% y-o-y (up 16.6% q-o-q). Other expenses too went up by 9.6% y-o-y (up 38.6% q-o-q) denting EBITDA margins.
• Operating PBT declined by 29.2% y-o-y (up 15.3% q-o-q) owing to lower EBITDA and prior period adjustment with respect to power tariffs. Damodar Valley Corporation (DVC) has raised arrears bill amounting to Rs 98 mn for the period May 2010 to March 2011 based on final tariff order, out of which, the company has recognised Rs 49 mn during H1FY12 and the balance would be recognised during the year.
• PAT declined by 18.2% y-o-y (up 1.3% q-o-q) to Rs 139 mn. PAT margin was 9.3% vis-a-vis 10.2% in Q2FY11.
• EPS declined to Rs 9.5 vis-a-vis Rs 11.7 in Q2FY11.
Valuations: Current market price has strong upside
We have used the EV/EBITDA method to value Maithan. Based on this method, we arrive at a fair value of Rs 195 per share. At CMP of Rs 100 per share, this implies a valuation grade of ‘5/5’.
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