Hold Maharashtra Seamless; target of Rs 500: ICICI Direct

ICICI Direct's research report on Maharashtra Seamless

Maharashtra Seamless reported a good set of operational numbers for Q3FY19 wherein topline and EBITDA came in higher than our expectations. However, reported PAT came in lower than our estimate on the back of muted other income Topline came in at Rs 785.9 crore (up 39% YoY, 12% QoQ) higher than our estimate of Rs 766 crore EBITDA was at Rs 157.2 crore (up 158% YoY, 23% QoQ vs. our estimate of: Rs 147.5 crore). The corresponding EBITDA margin was at 20.0% (vs. Q3FY18: 10.8%, Q2FY19: 18.2%, our estimate: 19.3%) Other income for the period was at Rs 8.3 crore (down 56% YoY, 72% QoQ, lower than our estimate of Rs 30 crore). Hence, PAT came in at Rs 92.8 crore (up 139% YoY, 5% QoQ vs. our estimate of Rs 104.2 crore).

Outlook

At the end of Q2FY19, Maharashtra Seamless’ order book was at Rs 950 crore, which increased to Rs 1300 crore at the end of Q3FY19. The increase in order book augurs well for the company. The 350 KT Nagothane and 200 KT Mangaon plants are expected to reach full capacity by June 2019. However, going forward, we expect EBITDA margins to moderate from 9MFY19 level. We continue to value the stock on an SOTP basis and arrive at a target price of Rs 500. We assign HOLD rating to the stock.