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Recommendations India

MOIL 3QFY2014 performance highlights and results update

February 14, 2014, Friday, 05:44 GMT | 00:44 EST | 10:14 IST | 12:44 SGT
Contributed by Angel Broking

For 3QFY2014, MOIL’s net sales and adjusted PAT were above our estimates. We recommend a Neutral rating on the stock.

Net sales growth 15.5% yoy: The company’s net sales grew 15.5% yoy to Rs.264cr (above our estimate of Rs.251cr) due to higher volumes coupled with higher realizations. The volumes increased by 2.7% yoy to 290,611 tonne whereas the realizations improved 7.3% yoy to Rs.8,291/tonne.

EBITDA margin expands 161bp yoy: During 3QFY2014, the company’s EBITDA increased by 19.2% yoy to Rs.137cr and EBITDA margin expanded by 161bp yoy to 51.9% due to higher sales. Other income increased by 77.2% yoy to Rs.113cr which included a one-time write-back of provision worth Rs.44cr. Adjusting for this write back, net profit was flat yoy at Rs.114cr (above our estimate of Rs.107cr).

Outlook and valuation: After a steep decline in manganese ore prices during FY2012-13, prices have stabilized over the past 2-3 quarters. Going forward, we expect MOIL’s realizations to stabilize over the coming one year, especially considering the INR depreciation against the USD which makes landed cost of imported manganese ore expensive. However, we remain concerned over modest volume growth and utilization of excess cash. We believe valuations at 2.9x FY2015 EV/EBITDA is fair. Hence, we recommend a Neutral rating on the stock.