Recommendations » India

MOIL 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, MOIL’s net sales were lower than expected due to lower-thanexpected volumes and realizations, whereas the PAT was in-line with our estimate. We recommend a Neutral rating on the stock.

Net sales dip 4.7% yoy: During 3QFY2013, MOIL’s net sales decreased by 4.7% yoy to Rs.228cr (below our estimate of Rs.268cr) due to lower sales volumes (-1.0% yoy) and lower realizations (-3.3% yoy).

EBITDA margin improves 459bp: Despite a decline in top-line, the EBITDA rose by 4.8% yoy to Rs.115cr due to lower raw material expenses. Other income increased by 28.6% to Rs.64cr, resulting in net profit growth of 11.8% yoy. Lowers prices by 5% for 4QFY2013: The company has cut manganese ore prices by 5% for 4QFY2013, which could be on account of rising imports of manganese ore in India, in our view.

Volume guidance muted: The company expects sales volumes to remain flat during FY2013-14, although it expects volume growth to pick up from FY2015. Outlook and valuation: After a steep decline in manganese ore prices during CY2011, manganese ore prices have stabilized in the global markets. However, we do not foresee any meaningful upside in manganese ore prices over the coming one year. Further, we estimate MOIL’s sales volumes to remain flat during FY2013-14. In the absence of any significant volume growth, we believe the stock lacks key catalysts. The stock is trading at FY2014E EV/EBITDA of 4.3x, which is fair in our view. Hence, we recommend a Neutral rating on the stock.