Buy Adhunik Metaliks; target of Rs 154: Motilal Oswal

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Buy Adhunik Metaliks; target of Rs 154: Motilal Oswal

Motilal Oswal is bullish on Adhunik Metaliks and has recommended buy rating on the stock with a target of Rs 154 in its February 12, 2011 research report.

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Motilal Oswal is bullish on Adhunik Metaliks and has recommended buy rating on the stock with a target of Rs 154 in its February 12, 2011 research report.

"Adhunik Metaliks' 3QFY11 consolidated PAT grew 41% YoY to Rs 541 million (up 48% QoQ, higher than our estimate of Rs 446 million) due to strong iron ore and manganese ore realizations and a ramp up of manganese production. Orissa Manganese and Mineral's (OMM) PAT increased 86% YoY to Rs 430 million (up 47% YoY) due to high manganese volumes and better realizations of manganese and iron ore. OMM sold 214k tons of iron ore, up 35% QoQ and it sold 54k tons of medium/high grade manganese ore. Average iron ore realization increased 25% QoQ to Rs 2,867/ton due to strengthening of iron ore prices led by a shortage in Orissa."

"With the start of mining operations at three new OMM manganese mines, the company plans to ramp up manganese production to 300k tons (from 143k tons in FY10) over the next 24 months. A captive iron ore mine in Keonjhar district has been delayed due to procedural issues in Orissa. The company had been expecting mining to start in 4QFY11, which now looks ambitious. However, the final stage of reconfirmation approval of the Suleipat mine (owned by a JV) is expected by the end of 4QFY11. It can start initial production immediately if the approvals are received."

"The commissioning of a 1.2mtpa beneficiation unit and a pellet plant will expand margins. The beneficiation plant is expected to be commissioned in 1QFY12 and the pellet plant is due to be commissioned in 3QFY12. We expect consolidated EPS CAGR of 19% to Rs 18.8 over FY10-13. The stock trades at FY12E P/E of 4.7x and EV/EBITDA of 5x. Reiterate Buy with a target price of Rs 154 (based on 6.5x FY12E EV/EBITDA)," says  Motilal Oswal research report.

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