Buy Maharashtra Seamless; target of Rs 430: ICICIdirect

ICICIdirect.com`s research report on Maharashtra Seamless“Over the last couple of years, supplies of seamless pipes and tubes from domestic manufacturers (like Maharashtra Seamless) to E&P and other companies had been affected by dumping of steel pipes and tubes by Chinese manufacturers. Hence, in August 2014, the Director General (Safeguard) recommended that the Government of India impose a safeguard duty on import of seamless pipe and tubes. As Maharashtra Seamless is a major player in the domestic seamless pipe segment it is likely to be a key beneficiary from the imposition of safeguard duty on import of seamless pipe and tubes. This move is likely to aid Maharashtra Seamless in augmenting its sales realisations in the domestic market. Furthermore, the sales volume is also likely to witness healthy traction, going forward.” “Going forward, we expect an improvement in capacity utilisation and realisation levels. We have modelled seamless sales volume of 217500 tonnes for FY15E and 275000 tonnes for FY16E. For ERW, we have modelled seamless sales volume of 55000 tonnes for FY15E and 60000 tonnes for FY16E. We have assumed blended EBITDA/tonne will increase from Rs 3551/tonne in FY14 to Rs 6350/tonne in FY15E and further to Rs 9163/tonne in FY16E. Subsequently, we have upgraded the stock from HOLD to BUY with a target price of Rs 430, valuing the company at 6x FY16E EV/EBITDA. Maharashtra Seamless has a strong balance sheet, healthy cash flow and net cash status, which augurs well for the company,” says ICICIdirect.com research report.

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