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UBS Investment Research
Monnet Ispat
Environmental clearance for coal
„ Power and steel expansion in Raigarh on track
Monnet Ispat (MISP) is on track to commission power and steel capacity
expansion at its Raigarh plant. We expect the 80MW power plant expansion to be
commissioned in Q4FY11 and the steel expansion to be commissioned in FY12.
„ CP Baid has joined as deputy MD—increased management bandwidth
CP Baid has joined MISP as deputy managing director. Mr. Baid has over three
decades of experience as an operations expert, and his last stint was with the
Vedanta Group (Sesa Goa). We believe his appointment increases management
bandwidth at a critical juncture as the company moves ahead on its expansion
plans.
„ Environmental clearance obtained for Mandakini mine
The company recently obtained environmental clearance for its Mandakini mine
for a mining plan of 7.5mtpa. The consortium (Monnet Power, Tata Power, and
Jindal Photo) is now seeking to expand the mining to 15mtpa (Monnet’s share to
be 5mtpa). We believe Monnet Power has sufficient land and will have sufficient
coal for setting up additional power capacity at Angul.
„ Valuation: Buy rating, and price target of Rs730
We maintain our Buy rating and our sum-of-the-parts-based price target of Rs730.
We continue to value the power business at 7x EV/EBITDA, the steel business at
5.5x EV/EBITDA on FY12E financials, and the equity invested in its uncommissioned power plant at 2.2x P/BV.
CP Baid joins as deputy managing director
CP Baid has joined MISP to look after day-to-day operations as well as to focus
on expansion projects. He has over 36 years of experience, and was earlier at
Sesa Goa (Vedanta Group). We believe CP Baid’s addition to the management
team will increase management bandwidth.
Environmental clearance obtained for Mandakini Coal Mine
Mandakini Coal Company (MCCL), a joint venture between MISP, Tata Power,
and Jindal Photo, obtained environmental clearance in October 2010 for a
mining plan of 7.5mtpa. Mandakini Coal mine has mineable coal reserves of 288
Mio MT. MCCL is now seeking approval for a revised mining plan of 15mtpa.
We believe that MCCL is seeking an endorsement of the environmental
clearance for 15mtpa. MCCL has also filed a forest diversion proposal with the
forest department in the state of Orissa and is awaiting approval.
Seeking increased mining plan in Utkal mine
MISP has also obtained approval for a 2.2mtpa mining plan, and environmental
clearance and stage 1 forest clearance for its Utkal mine. It has filed for
increasing the mining capacity to 3.5mtpa. Once the approval is obtained, MISP
will seek to endorse the environment clearance for increased mining capacity.
Opportunity to expand power capacity beyond 1050 MW
While MISP has all the approvals and financial closures for a 1050MW power
plant, we believe it can seek to increase the capacity of the power plant beyond
1050MW once the expanded mining plans get endorsed for environmental
clearance, and obtain the necessary forest clearances. We believe MISP has
acquired the land required for increasing power capacity beyond 1050MW.
Expansion in Raigarh on track
According to the company, the power and steel expansion in Raigarh are on
track. We expect the increased power capacity to be commissioned in Q4FY11
and the steel expansion to be commissioned during FY12.
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