Buy Adhunik Metaliks; tgt of Rs 73: Arihant capital markets

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Buy Adhunik Metaliks; tgt of Rs 73: Arihant capital markets

Arihant capital markets is bullish on Adhunik Metaliks and has recommended buy rating on the stock with a target of Rs 73 in its February research report.

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Arihant capital markets is bullish on Adhunik Metaliks and has recommended buy rating on the stock with a target of Rs 73 in its February research report.

"Adhunik Metaliks (AML) reported consolidated net sales of Rs 483cr. AML's standalone revenues increased 11% yoy to Rs 380cr (Rs 342cr) on account of higher pig iron and rolled steel volumes and higher realisations across the product segment. Pig iron sales grew 90% yoy and rolled steel by 4% yoy. Billets and ferro alloys volumes declined 24% yoy and 85% yoy, respectively. AML's 100% subsidiary, OMML, posted muted performance as its revenues grew by 6% yoy largely due to decline in iron ore and manganese ore realisation. Manganese ore operations continued to be impacted by mining issues in Orissa as volumes came off sharply by 76% yoy and 32% qoq. Iron ore volumes increased 23% yoy and 25% qoq, while realisations dipped 9% yoy. 1.2mn tonne pellet that got commissioned during 1QFY12 contributed 50,679 tonne of pellets to sales volume."

"Standalone EBITDA witnessed improvement on qoq basis as raw material cost incidence came down sequentially from 52% to 48%. Decline in other expenditure and employee cost further brought down overall cost. Consequently, std. EBITDA margins came in at 19% compared 4.8% during 2QFY12. OMML's EBITDA margin declined both yoy and qoq basis to 44% largely on account of decline in realisations. Standalone EBITDA witnessed improvement on qoq basis as raw material cost incidence came down sequentially from 52% to 48%. Decline in other expenditure and employee cost further brought down overall cost. Consequently, std. EBITDA margins came in at 19% compared 4.8% during 2QFY12. OMML's EBITDA margin declined both yoy and qoq basis to 44% largely on account of decline in realisations."

"Adhunik Metaliks reported stellar operating performance due to lower operating cost; raw material cost in particular. Going forward, we expect operating parameters to improve on account of commencement of captive iron ore mine and 1.2mn tonne pellet plant at OMML. Nevertheless, we are lowering our FY12E and FY13E earnings estimates by 5% and 16% respectively to account for lower volumes across the business segment. We have valued AML's steel business at 4.5x FY13E EBITDA and mining business at 3.5x FY13E EBITDA and value power business at book value. Our SOTP based fair value comes at Rs 73. We recommend Buy on Adhunik Metaliks," says Arihant capital markets research report.

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To read the full report click on the attachment