Hold Maharashtra Seamless; target of Rs 240: ICICI Direct

Maharashtra Seamless reported a good set of Q2FY17 numbers. The topline broadly came in line with our estimate while EBITDA and PAT came in higher than our estimate. The seamless pipes sales volume for the quarter came in at 43264 tonne (up 12.4% YoY, down 1.7% QoQ) marginally lower than our estimate of 46750 tonne. The ERW sales volume registered a healthy increase of 30.3% QoQ to 17591 tonne, higher than our estimate of 15000 tonne. Total pipes sales volume came in at 60855 tonne (our estimate: 61750 tonne) Gross income from operations were at Rs 337.4 crore. After adjusting for excise, net operating income was at Rs 304.9 crore (up 16.3% YoY, 5.7% QoQ), broadly in line with our estimate of Rs 312.8 crore EBITDA was at Rs 59.4 crore (up 103.4% QoQ), higher than our estimate of Rs 34.6 crore. Lower operating cost per tonne of Rs 40342/tonne (down 14.5% YoY, 10.5% QoQ) aided margin expansion during the quarter. Other income came in at Rs 19.3 crore, higher than our estimate of Rs 16.2 crore. Hence, PAT came in at Rs 38.8 crore (up 921.1% YoY, 62.3% QoQ), higher than our estimate: Rs 22.0 crore.

MSL reported a good set of Q2FY17 numbers wherein the EBITDA margin expansion to the tune of 936 bps QoQ was driven by significant cost savings. Going forward, we believe the anti-dumping duty, if accepted, will aid in improvement of capacity utilisation of the seamless pipes segment. We value the company on an SOTP basis and, subsequently, arrive at a target price of Rs 240. We have a HOLD recommendation on the stock.  For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.