Angel Broking is bullish on Monnet Ispat and has recommended buy rating on the stock with a target of Rs 318 in its February 15, 2013 research report.
“For 3QFY2013, Monnet Ispat (MIL) reported a disappointing operating performance. We maintain our Buy rating on the stock. MIL’s net sales declined by 4.7 percent yoy to Rs459cr, mainly due to decrease in volumes in sponge iron and ferro alloys segments, coupled with decrease in realizations of sponge iron and structural steel segments.”
“The company’s EBITDA declined by 9.8 percent yoy to Rs116cr, while the EBITDA margin contracted by 144bp yoy to 25.3 percent, mainly due to higher staff cost and other expenditure. Interest and depreciation expenses grew by 53.5 percent and 16.7 percent yoy to Rs29cr and Rs22cr, respectively. Hence, net profit decreased by 24.8 percent yoy to Rs58cr. MIL is on the verge of conducting (or has conducted) trial runs for its various downstream facilities such as plate mill, blast furnace, sinter plant, rebar mill etc. The benefits from these facilities are likely to accrue from 2HFY2014 in our view.”
“MIL is on the verge of a massive expansion in its steel business. The long-term stock performance will be determined by the timely expansion of the 1.5mtpa steel plant and unlocking of value in Monnet Power, which is implementing the 1,050MW power project. Although there have been delays in the commencement of these projects, most of these projects would be backed by captive resources, thus ensuring robust profitability. Hence, we recommend Buy on the stock with a target price of Rs318, valuing the steel business at 5.0x FY2014E EV/EBITDA and investment in Monnet Power at 1.5x P/BV,” says Angel Broking research report.
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