Buy Maharashtra Seamless; target of Rs 560: Kotak Securities

Kotak Securities' research report on Maharashtra Seamless

We initiate coverage on Maharashtra Seamless MSL (MSL) with ‘BUY’ rating and a target price of Rs 560 based on 9x EV/EBITDA FY19E earnings. We believe that MSL valuations can get rerated on back of strong growth in company’s consolidated profits through FY17-19E driven by 1) recovery in demand for seamless pipes in the domestic/international market 2) imposition of anti-dumping duty on Chinese imports would lead to demand shifting towards domestic industry and 3) limited competition from domestic players who are struggling with their highly leveraged balance sheets.

Outlook

We project 49% CAGR between FY17-19 in consolidated profits from Rs.1.15 Bn in FY17 to Rs 2.6 Bn in FY19E. At current price of Rs 472, MSL stock is trading attractive at 7.4x EV/EBITDA and 12x P/E on FY19E earnings.