MOIL sales at Rs 2.38bn (-1.5 percentYoY/10.5 percentQoQ) were inline with our estimate of Rs 2.30bn. Mn ore realisations increased by 25.7 percentYoY/24.7 percentQoQ to Rs 8722 per tonne (Dce: Rs 7804/mt) due to richer product mix. Mn ore volumes fell by 17.8 percentYoY/28.1 percent QoQ to 259,000 (DCe: Rs 280kt) with fines contributing only 32 percent of sales while higher grade ore contributing 68 percent of sales. Ferro grades realizations fell by 2.7 percentYoY/8 percentQoQ to ' 9874/tonne, whereas Fines realizations were at Rs 3152/tonne, up 17.8 percentYoY/8.9 percentQoQ. Production rose by 2 percentYoY to 252kt.
EBITDA rose by 14 percentYoY/6.6 percentQoQ to Rs 1.16bn (DCe: Rs 1.1bn). Margins improved to 48.8 percentprimarily due to better product mix. Other income increased by 17.4 percentYoY/2.0 percentQoQ to Rs 614mn. PAT improved by 12.7 percentYoY/1.8 percentQoQ to Rs 1.12bn (DCe: Rs 1.06mn) due to higher than expected EBITDA.
MOIL has maintained the prices in Q2FY14 after increasing prices by 9 percent in Q1FY14.It expects demand to remain stable and will benefit from the Re depreciation.MOIL currently has inventory of 66,000 tonnes of Mn ore.
MOIL expects to incur a capex of Rs 2bn and Rs 4bn in FY14 and FY15 respectively which we believe it is too optimistic given MOIL track record of under achieving the capex targets. MOIL has spent Rs 330mn in Apr-Jul 2013 on increasing the Mn ore output. It has only incurred Rs 450mn capex in FY12 and FY13 respectively. MOIL expects Mn ore volumes of 1.15 mn tones and 1.2mn tones in FY14 and FY15 respectively.
MOIL is contemplating of entering into JV with RINL to manufacture seamless tubes which we believe is an unrelated diversification for the company.
Valuation: "MOIL is currently trading at 1.7xFY14EV/EBITDA and 1.5xFY15EV/EBITDA. We reduce our target price per share to Rs 228 (3.0x FY15 EV/EBITDA) given the higher capital expenditure plans of the company and maintain our Accumulate rating on the stock given the cheap valuations," says Dolat Capital research report.
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