Buy MOIL; target of Rs 332: A C Choksi

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Buy MOIL; target of Rs 332: A C Choksi

A C Choksi is bullish on MOIL and has recommended buy rating on the stock with a target of Rs 332 in its February 8, 2012 research report.

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A C Choksi is bullish on MOIL and has recommended buy rating on the stock with a target of Rs 332 in its February 8, 2012 research report.

"MOIL has reported a year-on-year fall in Dec 2011 quarter's bottomline (PAT), EBITDA & topline (Net Sales) by 19%, 32% & 5% respectively over Dec 2010. Continued pressure in Mn ore prices (currently $4.2/dmtu) have lead to poor results. Mn ore prices have fallen by ~42-43% in CY 11. Sales stood at around ~285,500 MT (up 5.4% q-oq). During the quarter, its PAT fell by ~18.8% y-o-y to Rs1.02 bn as compared to Rs1.25 bn in 3Q FY11. PAT for 9 months was Rs3.1 bn vs Rs4.6 bn year earlier.(-32%) EPS for 3QFY12 came in at Rs6.04 as compared to Rs7.44 for 3QFY11.The EPS for 3QFY12 was at Rs6.02. EPS for 9 months ending Dec 11 was Rs18.5 as against Rs27.1 for Dec 10. EBITDA for the 3QFY12 reduced by 32% to Rs1.09 bn from Rs1.61 bn over 3QFY11. The 9 month EBITDA stood at Rs3.4 bn vs Rs6.1 bn (-43%). The top line decreased by 5.4% during the quarter (y-o-y) to Rs2.39 bn from Rs2.53 bn."

"The 9 month sales were Rs6.98 bn vs Rs8.88 bn(-21%). Mn Ore realizations stood at Rs7,993/Tn(down ~2% q-o-q).Production for 9 months ending Dec 2011 was ~755,363 tonnes (285,100 MT for the 3rd quarter).Inventory stands at 149,000 tonnes. There was a decline in realizations due to price cut and extraction of low grade of ore. Product Mix is expected to remain tilted towards low grade of ore in fourth quarter as well. MOIL has taken a price cut of ~ 5-15% in ferro grade ~12% in silico grade & ~20% in fines for Q4 FY12. The company expects the volumes to be higher for the remaining quarter of FY 12 as they have made available 450,000 tonnes. 138,000 tonne are ferro grade out of the above."

"At CMP of Rs264 and on a trailing twelve months basis, MOIL is trading at EV/EBITDA of 5.5 times, EV/Sales of 2.9times and P/E of 9.9 , P/S of 4.7 times. As per the management, the production growth of Mn Ore in India is 22% and globally it is even more at ~33%. On the other hand there hasn't been a significant improvement in the consumption of the ore. Rather it is flat to slightly less. The capacity has increased from 35 MT to 47 MT globally. The increase in availability of Mn ore combined with subdued steel consumption has put pressure on the Mn ore prices. We believe, MOIL is likely to see the pressure continuing for the fourth quarter of fiscal 12 as well; mostly due to lower realization and inferior product mix. However the management feels the prices should stabilize post FY 12. We believe better realizations in couple of quarters time should make look the current valuations decent for MOIL; as a result we maintain our buy rating on the stock with a target price of Rs332," says A C Choksi research report.  

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