Buy MOIL; target of Rs 205: Sharekhan

Sharekhan's research report on MOIL

Stabilising international manganese ore prices and MOIL’s recent price hike of 7.5-15% for various grades of manganese ore hints at improving pricing environment. Price hike bodes well for recovery in MOIL’s margin, and we model 17%/5% increase in margin to Rs. 4,663/Rs. 4,883 per tonne in FY24E/FY25E. MOIL’s latest press release indicates strong growth in manganese ore sales volumes by 82%/91% m-o-m to 0.85/1.64 lakh tonnes in November/December 2022 and we estimate sales volume growth of 43% q-o-q to ~3 lakh tonnes in Q3FY23. Removal of steel export duty would further aid volume recovery in the coming quarters and Q4 is seasonally strong in term of volumes. We expect MOIL’s EBITDA/PAT to clock 16%/17% CAGR over FY23E-25E led by both volume/margin recovery. The company’s strong balance sheet (cash & cash equivalent of Rs. 1,030 crore) would support its strategic plan to expand production to 3 mtpa by 2030, which implies 12% CAGR over FY22-30E.

Outlook

We maintain a Buy rating on MOIL with an increased PT of Rs. 205 nothing inexpensive valuation of 3.2x/2.5x FY24E/FY25E EV/EBITDA and healthy dividend yield of 3-4%.