CRISIL assigns fair value of Rs 44 to Modison Metals

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CRISIL assigns fair value of Rs 44 to Modison Metals

CRISIL Research has come out with its report on Modison Metals. The research firm has initiated coverage on the company with a fundamental grade of 3/5 and has maintained the fair value of Rs 44 per share.

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CRISIL Research has come out with its report on Modison Metals . The research firm has initiated coverage on the company with a fundamental grade of 3/5 and has maintained the fair value of Rs 44 per share.

Modison Metals Ltd (Modison) reported a strong Q4FY11. Revenues exceeded CRISIL Equities' expectations while EBITDA margins were in line. Revenue growth was driven by higher silver prices the key raw material for the low voltage contacts. We may revisit our estimates post interaction with the management. We maintain the fundamental grade of 3/5.

Q4FY11 result analysis
• Modison's Q4 revenues grew by 17% y-o-y and 39% q-o-q to Rs 392 mn. The Q4FY11 performance was driven by higher realisation of low voltage contacts as the price of silver, a key raw material, surged by 21% to Rs 55,900 per kg during the quarter. We believe, realisations from medium and high voltage contacts remained stable as copper prices, a key raw material, declined by 2% during the quarter.

• EBITDA margin declined by 104 bps y-o-y and 63 bps q-o-q to 23.8% on account of higher other expenses, which increased to Rs 40 mn from Rs 28 mn in Q4FY10, and an increase in raw material prices.

• PAT margin declined by 81 bps y-o-y but increased by 30 bps q-o-q. PAT increased by 11% y-o-y and 43% q-o-q to Rs 53.1 mn. The growth in the profit was on account of higher revenues.

• EPS increased by 11% y-o-y and 43% q-o-q to Rs 1.64 in line with PAT.

• Overall, FY11 revenues grew 31% y-o-y to Rs 1,271 mn, driven by higher silver prices, which increased by 108% during the year. EBITDA margin remained flat y-o-y at 23.1% and PAT margin improved marginally by 25 bps to 12.5%.

• The company has declared a dividend of Re 1 per share, subject to approval. At the current market price, the dividend yield is 3.4%.

Valuations: Current market price has strong upside
We continue to use the discounted cash flow method to value Modison. We maintain our fair value of Rs 44 per share, says CRISIL Research report.

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.

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