Buy Maharashtra Seamless; target of Rs 421: Dolat Capital

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Buy Maharashtra Seamless; target of Rs 421: Dolat Capital

Dolat Capital is bullish on Maharashtra Seamless and has recommended buy rating on the stock with a target of Rs 421 in its February 6, 2012 research report.

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Dolat Capital is bullish on Maharashtra Seamless and has recommended buy rating on the stock with a target of Rs 421 in its February 6, 2012 research report.

"Maharashtra Seamless (MSL) Q3 FY12 profits ` 810mn (DCe: ` 805mn) primarily due to higher than expected volumes however EBITDA per tonne at `12272 per tonne for seamless pipes was lowest in 16 quarters ?? Net sales increased 6.9% QoQ/52.2% YoY) to ` 6.17bn (DCe ` 5.7bn) primarily due to higher volumes and better realisations. Sales volumes in seamless pipes at 70936 tonne (+0.3%QoQ/46%YoY) and ERW pipes at 33755 tonnes (+6.7%QoQ,40.7%YoY) witnessed strong traction. However EBITDA per tonne continue to decline for seamless pipes and were at lowest in 16 quarters at ` 12,272 (DCe ` 14000 per tonne) due to issues regarding the billet availability leading to higher cost. EBITDA per tonne in the ERW segment increased by 54%QoQ/3.4%YoY to 4467 per tonne (Dolat Est ` 3000 per tonne). EBITDA fell by 4.7% QoQ to ` 1.02bn on back of lower margins at 16.6%."

"MSL will commence its new pipe mill capacity of 200000 tonnes in Q4FY12 which will drive volume growth over FY12-14E. MSL's order book remained flat sequentially at ` 5.51bn despite strong demand environment. Export order book remains strong and currently constitute 50% of its order book. MSL is facing margin pressure in domestic markets due to increase in competition from the Chinese players and Indian players. We expect MSL earnings to grow at 13%CAGR over FY12-14E primarily led by volumes. Demands for seamless pipes continue to remain strong given the high oil prices. We believe MSL, with a strong balance sheet is well-placed to capitalize on the strong demand for seamless pipes. MSL is currently trading at 4.6xFY12EV/EBITDA and 4xFY13EV/EBITDA. We maintain our Buy rating on the stock with a price target of ` 421 (5x FY13 EV/EBITDA)," says Dolat Capital research report.

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To read the full report click on the attachment