Buy Mishra Dhatu Nigam: target of Rs 281: ICICI Securities

ICICI Securities research report on Mishra Dhatu Nigam

Mishra Dhatu Nigam (Midhani) has reported a decent topline performance in Q1FY21 at Rs1.14bn (down 14% YoY). The reduction in topline reflects 45 days of shutdown in Q1. There has been a meaningful compression in gross margins from the quarterly runrate of FY20 – perhaps due to order mix. Q1FY21 would have been defence heavy to result in gross margins declining from 91% to 64% YoY. Given the breakup in FY20-end orderbook, with ~80% of orderbook comprising of space orders – FY21 execution for Midhani will be space heavy. We have seen a new timeline for Chandrayan III – with lander and rover and no orbiter. Budget allocation across GoI ministries should expectantly come down in H2FY21 – defence, space irrespective.

Outlook

However, the relatively smaller size of the space budget may still allow it to see lower contraction. We maintain BUY.