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Nov 15, 2011, 04.31 PM | Source: Moneycontrol.com

CRISIL assigns fair value of Rs 195 to Maithan Alloys

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 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.

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’.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

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