Moil 1qfy2013ru

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Please refer to important disclosures at the end of this report 1

EBITDA 102 127 (19.3) 86 18.9

% margin 42.2 60.3 (1,814)bp 42.6 (49)bp

Source: Company, Angel Research

For 1QFY2013, MOIL’s net sales increased by 15.5% driven by higher volumes;

however, its EBITDA fell by 19.3% yoy due to decline in manganese ore prices.

During 1QFY2013, MOIL’s net sales rose

by 15.5% yoy to ` 243cr (below our estimate of ` 283cr) mainly on account of

higher volumes. Sales volumes grew by 42.5% yoy (+5.0% qoq) to 315,000

tonne; however, blended realization declined 16.4% yoy (but up 10.5% qoq) to

` 6,940/tonne.

During 1QFY2013, the company’s

EBITDA decreased by 19.3% yoy to ` 102cr while the EBITDA margin dipped by

1,814bp yoy to 42.2%, mainly on account of a decline in the prices of

manganese ore. Other income increased by 20.4% yoy to ` 52. Consequently,net profit decreased by only 8.7% yoy to ` 99cr (above our expectation of ` 93cr).

After declining steadily since January 2011 manganese

ore prices have stabilized over the past three-four months. MOIL’s realizations

improved sequentially during 1QFY2013 mainly aided by INR depreciation

against the USD in our view. Going forward, although MOIL has raised

manganese ore prices for 2QFY2013, we do not foresee further meaningful rise

in prices in the coming one year. Hence,

Key financials (Standalone)

% chg 17.6 (21.1) 2.0 8.2

% chg 26.3 (27.0) (4.0) 6.3

OPM (%) 67.3 50.2 50.6 50.9

P/E (x) 7.7 10.5 11.0 10.3

P/BV (x) 2.1 1.8 1.7 1.5

RoE (%) 30.9 18.8 16.0 15.5

RoCE (%) 37.9 17.9 16.4 16.3

EV/Sales (x) 2.3 2.7 2.6 2.3

EV/EBITDA (x) 3.4 5.4 5.1 4.4


CMP ` 269

Target Price -

Investment Period -

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 80.0

MF / Banks / Indian Fls 3.1

FII / NRIs / OCBs 5.4 Indian Public / Others 11.5

Abs. (%) 3m 1yr 3yr

Sensex 6.6 4.2 15.8

MOIL 7.1 (11.5) -

Note: MOIL was listed on Dec. 15, 2010

Face Value ( ` )

BSE Sensex

Nifty

Reuters Code

4,522

0.8

328/216

196,269

Mining

Avg. Daily Volume

Market Cap ( ` cr)

Beta

52 Week High / Low

Net debt ( ` cr) (2,093)

10

17,561

5,323

MOIL.BO

MOIL@IN

Tel: 022- 3935 7800 Ext: [email protected]

Tel: 022- 39357800 Ext: 6841

[email protected]

Performance Highlights

1QFY2013 Result Update | Mining

August 9, 2012

7/31/2019 Moil 1qfy2013ru


MOIL | 1QFY2013 Result Update

August 9, 2012 2

Exhibit 1: 1QFY2013 performance(Standalone)

Raw material (34) 15 - (2) 1,775.4 (38) 32 -% of net sales (13.9) 6.9 (0.9) (4.2) 2.8

Staff cost (58) (55) 5.5 (63) (7.1) (236) (202) 16.8

% of net sales (24.1) (26.3) (31.1) (26.2) (17.7)

Other expenditure (48) (35) 37.5 (51) (5.6) (193) (203) (4.9)

% of net sales (19.9) (16.7) (25.3)

Total expenditure (140) (83) 68.2 (116) 21.3 (466) (373) 25.0

% of net sales (57.8) (39.7) (57.4)

OPM (%) 42.2 60.3 42.6 48.2 67.3

Other operating income 0 0 0 - 0 0

EBITDA margins (%) 42.2 60.3 42.6 48.2 67.3

Interest 0 0 - 0 - 0 0 -

Depreciation (7) (7) 6.1 (9) (13.4) (30) (33) (8.0)

Other income 52 43 20.4 63 (16.8) 203 145 39.7

Exceptional items 0 0 - 0 - 0 0 -

% of net sales 60.7 77.6 (21.9) 69.6 67.4 77.2 (12.6)

Tax (48) (54) (11.9) (41) 16.5 (196) (292) (32.9)

% of PBT (32.4) (33.2) (29.2) (32.3) (33.2)


Exhibit 2: 1QFY2013 – Actual vs Angel estimates

Net sales 243 283 (14.3)

EBITDA 102 133 (23.1)

EBITDA margin (%) 42.2 47.0 (485)bp

PAT 99 93 6.9


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August 9, 2012 3

Result highlights

Higher volumes drive net sales growth

During 1QFY2013, MOIL’s net sales increased by 15.5% yoy to ` 243cr (below ourestimate of ` 283cr) mainly on account of higher volumes. Sales volumes grew by

42.5% yoy (+5.0% qoq) to 315,000 tonne; however, blended realization declined

16.4% yoy (but up 10.5% qoq) to ` 6,940/tonne. The sequential increase in

realizations was mainly due to INR depreciation against the USD in our view.

Exhibit 3: Average realization for 1QFY2013 declines by 16.4% yoy


EBITDA margin slips by 1,814bp yoy due to lower realization

During 1QFY2013 the company’s EBITDA decreased by 19.3% yoy to ` 102cr

while the EBITDA margin dipped by 1,814bp yoy to 42.2%, mainly on account of a

decline in the prices of manganese ore. Other income increased by 20.4% to

` 52cr mainly on account of a higher cash balance. Consequently, the net profit

decreased by only 8.7% yoy to ` 99cr (above our expectation of ` 93cr).

Exhibit 4: EBITDA declines by 19.3% yoy


10,0059,376

8,300 8,150 7,993

6,279 6,940

0

2,000

4,000

6,000

8,000

10,000

12,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

( ` / t o n n e )

( t o n n e s )

Sales volumes Realization -RHS

161 160

127111 109

86102

63.5 63.460.3

44.7 45.742.6

47.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

0

20

40

60

80

100

120

140

160

180

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

( % )

( `

c r )

EBITDA EBITDA margin -RHS

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August 9, 2012 4

Investment rationale

Production capacity to expand, albeit gradually

MOIL has started expanding its existing mines to augment its production capacity

to 1.5mn tonne by FY2016 from 1.1mn tonne in FY2012.

Adding value-added capacity through JVs

Currently, MOIL has beneficiation plants of 0.4mn tonne at Dongri Buzurg mine

and of 0.5mn tonne at Balaghat mine to upgrade the quality of ore produced.

MOIL intends to expand its value-added capacity and thus has entered into JVs

with SAIL and Rashtriya Ispat Nigam Ltd (RINL) to set up two ferro alloy plants in

Chhattisgarh and Andhra Pradesh. The proposed installed capacity in case of the

JV with SAIL is 1,06,000 tonne and that in case of RINL is 57,500 tonne.

Manganese prices stabilize after a steep decline

Manganese ore prices had declined steadily since January 2011 on account of

oversupply in global markets. However, since the past three to four months,

manganese prices have stabilized in the global markets. Further, the depreciation

in the INR against the USD has resulted in higher realizations for MOIL in the past

two quarters.

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August 9, 2012 5

Outlook and valuation

After declining steadily since January 2011 manganese ore prices have stabilized

over the past three to four months. MOIL’s realizations improved sequentially

during 1QFY2013 mainly aided by INR depreciation against the USD in our view.

Going forward, although MOIL has raised manganese ore prices for 2QFY2013,

we do not foresee further meaningful rise in prices in the coming one year.

Hence,

Exhibit 5: EPS – Angel forecast vs. consensus

FY2013E 24.5 25.1 (2.1)

FY2014E 26.1 26.6 (2.0)


Exhibit 6: Recommendation summary

Sesa Goa 188 - Neutral 16,335 - 4.5 4.4 0.9 0.8 7.3 6.6 22.3 19.2 12.2 11.5

NMDC 182 - Neutral 72,217 - 9.6 8.7 2.3 1.9 5.0 4.3 27.1 24.4 32.9 29.7

Coal India 352 - Neutral 222,620 - 14.7 13.5 4.0 3.3 9.2 8.0 30.4 26.8 28.6 25.6


Company BackgroundIncorporated in 1962, MOIL is the largest producer of manganese ore by volume

(~50% of India’s production) in India with a capacity of 1.1mn tonnes and

reserves of 22mn tonnes (constituting 16% of India’s manganese reserves). Based

on its current production, its mine life stands at 21 years. The company produces

high, medium and low-grade manganese ore. All its mines are located in

Maharashtra and Madhya Pradesh. MOIL is also actively involved in exploration

and development activities to increase its reserves.

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August 9, 2012 6

Profit & loss statement(Standalone)

Other operating income

% chg 32.3 (25.0) 17.6 (21.1) 2.0 8.2

Total Expenditure 374 367 373 448 453 487

Net Raw Materials 254 264 (32) 19 26 28

Other 120 103 405 429 427 460

% chg 30.6 (34.5) 27.4 (41.1) 3.0 8.8

(% of Net Sales) 71.1 62.1 67.3 50.2 50.6 50.9

Depreciation 25 25 33 30 32 34

% chg 30.0 (35.6) 27.4 (42.6) 2.6 9.1

(% of Net Sales) 69.2 59.5 64.4 46.9 47.1 47.5

Interest & other Charges

Other Income 112 130 145 203 184 184

(% of PBT) 11.1 18.4 16.5 32.5 29.8 28.0

% chg 37.0 (29.8) 24.5 (29.0) (1.3) 6.3

Extraordinary Inc/(Expense) - - - - - -

Tax 343 240 292 196 205 218

(% of PBT) 34.1 34.0 33.2 31.3 33.2 33.2

Extraordinary (Expense)/Inc. 26 (1) - - - -

% chg 38.3 (29.7) 26.1 (27.0) (4.0) 6.3

(% of Net Sales) 51.3 48.1 51.6 47.7 44.9 44.1

% chg 38.3 (29.7) 26.1 (27.0) (4.0) 6.3

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August 9, 2012 7

Balance sheet (Standalone)

Equity Share Capital 28 168 168 168 168 168Reserves & Surplus 1,293 1,509 1,960 2,273 2,533 2,796

Total Loans - - - - - -

Deferred tax liabilities 19 13 1 - - -

Long Term liabilities - - 54 72 72 72

Long Term Provisions - - 1 1 1 1

Gross Block 342 357 396 423 623 723

Less: Acc. Depreciation 136 160 190 216 248 281

Capital Work-in-Progress 15 22 29 39 39 39

Goodwill - - - - - -

Defered tax assets - - - 7 7 7

Long Term Loans and adv. - - 1 1 1 1

Other Non Current Assets - - 5 6 6 6

Current Assets 1,445 1,742 2,199 2,480 2,569 2,768

Cash 1,232 1,487 1,880 2,088 2,142 2,273

Loans & Advances 41 63 78 98 108 119

Other current assets 172 192 241 293 319 376

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August 9, 2012 8

Cash flow statement (Standalone)

Profit before tax 1,007 707 880 607 617 656

Depreciation 25 25 33 30 32 34Change in working capital 113 (103) (29) (83) (38) (66)

Less: Other income (61) (127.5) 0.2 0.6 - -

Direct taxes paid 359 238 303 204 205 218

(Inc.)/ Dec. in fixed assets (49) (23) (49) (42) (200) (100)

(Inc.)/ Dec. in investments (0) (0) (2) (2) - -

Other income 104 124.2 - - - -

Issue of equity

Inc./(Dec.) in loans

Dividend paid (156) (110) (137) (98) (153) (175)

Inc./(Dec.) in cash 624 255 393 209 53 132

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August 9, 2012 9

Key ratios(Standalone)

P/E (on FDEPS) 6.8 9.7 7.7 10.5 11.0 10.3P/CEPS 6.3 9.2 7.3 9.8 10.2 9.6

P/BV 3.4 2.7 2.1 1.8 1.7 1.5

Dividend yield (%) 2.9 2.1 2.6 1.9 2.6 3.0

EV/Sales 2.5 3.1 2.3 2.7 2.6 2.3

EV/EBITDA 3.6 5.0 3.4 5.4 5.1 4.4

EV/Total Assets 2.5 1.8 1.2 1.0 0.9 0.7

EPS (Basic) 39.5 27.8 35.0 25.5 24.5 26.1

EPS (fully diluted) 39.5 27.8 35.0 25.5 24.5 26.1

Cash EPS 42.6 29.2 36.9 27.3 26.4 28.1

DPS 7.9 5.6 7.0 5.0 7.0 8.0

Book Value 78.6 99.8 126.7 145.3 160.7 176.4

EBIT margin 69.2 59.5 64.4 46.9 47.1 47.5

Tax retention ratio (%) 65.9 66.0 66.8 68.7 66.8 66.8

Asset turnover (x) 8.6 6.3 4.5 2.5 1.7 1.4

ROIC (Post-tax) 391.2 245.8 193.5 79.3 54.7 45.2

Cost of Debt (Post Tax) - - - - - -

Leverage (x) - - - - - -

Operating ROE 391.2 245.8 193.5 79.3 54.7 45.2

ROCE (Pre-tax) 83.6 38.1 37.9 17.9 16.4 16.3

ROE 65.5 31.1 30.9 18.8 16.0 15.5

Asset Turnover (Gross Block) 4.0 2.8 3.0 2.2 1.8 1.5

Inventory (days) 56 46 95 95 95 95

Receivables (days) 17 32 22 22 22 22

Payables (days) 20 23 25 25 25 25

WC. cycle (days) 36 39 40 57 56 54

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August 9, 2012 10

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement MOIL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

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Moil 1qfy2013ru