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Introduction
Man Industries India Ltd. (MIIL), the flagship company of MAN Group (UK), was
incorporated in May 1988 as an aluminium extrusions manufacturing company. Today,
it is a leading manufacturer and exporter of large diameter Carbon Steel Line Pipes
for various high pressure transmission applications for Gas, Crude Oil, Petrochemical
Products and Potable Water. It has an annual capacity to produce 1 million tonne
of submerged arc welding pipes through its manufacturing facilities at Anjar and
Pithampur in Gujarat and Madhya Pradesh. It has state-of-the-art manufacturing
facilities for Longitudinal Submerged Arc Welded (LSAW) & Helically Submerged
Arc Welded (HSAW) Line Pipes and also for various types of Anti-Corrosion Coating
Systems. It also owns modern facilities for manufacturing of Aluminum Extrusion
Products. Its operations are spread across globally with offices in U.K. and U.A.E.
besides India.
Investment Rationale
Industry Outlook: The Indian Large Diameter Pipe industry is among the world’s
top three manufacturing hubs after Japan and Europe. Indian Line Pipe Industry is
~USD 5 bn in size. Currently, there is an over capacity in the domestic system, but
India is still way behind in terms of Pipeline density, which stands at 3 km/1000
sq.kms as compared to 50km/1000 sq.kms in USA, UK and China, providing ample
scope for complete utilization of the existing facilities and further capacity expansion.
India needs around 15,000 kms of pipelines in coming years going by the demand
of gas here.
India is witnessing a spurt in construction of pipelines as the domestic gas availability
is poised to increase two-fold over the next four years. The government is also planning
to build national gas highways. Recently announced NELP VIII also provides thrust
to the growing demand for the pipeline infrastructure.
Moreover, water and irrigation offers a strong business opportunity for Indian pipe
manufacturers. The 11th five-year plan envisages around US$83bn of investments
in irrigation and water supply & sanitation over FY08-12E.
Indian Domestic Sector itself provides huge opportunities for line pipe sector. As
Gas has become the future fuel, construction of pipeline infrastructure has become
inevitable.
Location Advantages: MIIL’s Anjar Plant is situated in the western coastal belt of
the India. This enables it to minimize transportation costs while delivering it to the
end client. Their Anjar facility, located in close proximity to the Mundra and Kandla
ports, enables them to reduce transportation costs on export orders as well as inland
transportation costs on imported raw materials such as steel plates and coils.
Revenue Stability and Visibility: MIIL has recently bagged orders worth ` 12,000mn
taking the total order book to ` 25,000mn which is about 1.7x its FY10 revenues.
LSAW comprises almost 70% of this order book. MIIL has established its presence
in the international markets such as Middle East, Brazil and Africa leading to higher
export orders worth ` 23,650mn. MIIL has currently bid for projects worth more than
Rs 50,000mn. The robust order book provides the company with revenue visibility
in the longer term.
Diversification of business: In 2008, MIIL established Man Infraprojects, a subsidiary
to enter Real Estate, Hospitality and Infrastructure sector. The company has more than
1.5 million sq.ft of saleable land in Mumbai and Indore. Man Infraprojects possesses
more than 900,000sq.ft. of saleable land in the prime areas in and around Mumbai.
The company’s ongoing projects are located at Bandra and Vile Parle in Mumbai and
at Nerul in Navi Mumbai. The Mumbai projects are of commercial in nature and are
expected to be completed by Q4FY11.
The company’s flagship project in Nerul which is commercial and residential in nature
is expected to be completed by FY12-13. MIIL also has more than 600,000 sq.ft. of
saleable land in Indore. Also, any value unlocking of Man Infraprojects in the future
has the potential to make the Balance sheet stronger.
Foray into International Markets: MIIL has plans to expand in strategically
important international markets, like Middle East and in emerging markets like Africa
which have significant oil and gas reserves and high potential for large pipeline
projects. It has even established a regional office in the U.A.E. and intends to focus
on projects in the Middle East region and a certain African countries.
Healthy Net worth: MIIL has a total equity shareholders’ funds of ` 418.47 crores
having reserves worth ` 389.73 crores. This translates into a Book value per share of
` 78.17 as on FY10 end. At a CMP of ` 77, MIIL looks undervalued.
Valuations
At the CMP of 77, the stock is trading at 3.82x its TTM EPS of 20.16 and 0.99x its
BV of 78.17. The stock looks attractive due to its strong order book and probable
value unlocking from its saleable area in prime locations of Mumbai and Indore.
Technical View
The Stock is in a correction mode. The major supports for the stock are around 70 and
65. The resistance for the stock is around 80, 84 and 87 levels. A closing above 80
will generate fresh buy signal for the stock. We recommend accumulating the stock at
lower levels around its support levels with a medium perspective for a target of ` 87/-
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Introduction
Man Industries India Ltd. (MIIL), the flagship company of MAN Group (UK), was
incorporated in May 1988 as an aluminium extrusions manufacturing company. Today,
it is a leading manufacturer and exporter of large diameter Carbon Steel Line Pipes
for various high pressure transmission applications for Gas, Crude Oil, Petrochemical
Products and Potable Water. It has an annual capacity to produce 1 million tonne
of submerged arc welding pipes through its manufacturing facilities at Anjar and
Pithampur in Gujarat and Madhya Pradesh. It has state-of-the-art manufacturing
facilities for Longitudinal Submerged Arc Welded (LSAW) & Helically Submerged
Arc Welded (HSAW) Line Pipes and also for various types of Anti-Corrosion Coating
Systems. It also owns modern facilities for manufacturing of Aluminum Extrusion
Products. Its operations are spread across globally with offices in U.K. and U.A.E.
besides India.
Investment Rationale
Industry Outlook: The Indian Large Diameter Pipe industry is among the world’s
top three manufacturing hubs after Japan and Europe. Indian Line Pipe Industry is
~USD 5 bn in size. Currently, there is an over capacity in the domestic system, but
India is still way behind in terms of Pipeline density, which stands at 3 km/1000
sq.kms as compared to 50km/1000 sq.kms in USA, UK and China, providing ample
scope for complete utilization of the existing facilities and further capacity expansion.
India needs around 15,000 kms of pipelines in coming years going by the demand
of gas here.
India is witnessing a spurt in construction of pipelines as the domestic gas availability
is poised to increase two-fold over the next four years. The government is also planning
to build national gas highways. Recently announced NELP VIII also provides thrust
to the growing demand for the pipeline infrastructure.
Moreover, water and irrigation offers a strong business opportunity for Indian pipe
manufacturers. The 11th five-year plan envisages around US$83bn of investments
in irrigation and water supply & sanitation over FY08-12E.
Indian Domestic Sector itself provides huge opportunities for line pipe sector. As
Gas has become the future fuel, construction of pipeline infrastructure has become
inevitable.
Location Advantages: MIIL’s Anjar Plant is situated in the western coastal belt of
the India. This enables it to minimize transportation costs while delivering it to the
end client. Their Anjar facility, located in close proximity to the Mundra and Kandla
ports, enables them to reduce transportation costs on export orders as well as inland
transportation costs on imported raw materials such as steel plates and coils.
Revenue Stability and Visibility: MIIL has recently bagged orders worth ` 12,000mn
taking the total order book to ` 25,000mn which is about 1.7x its FY10 revenues.
LSAW comprises almost 70% of this order book. MIIL has established its presence
in the international markets such as Middle East, Brazil and Africa leading to higher
export orders worth ` 23,650mn. MIIL has currently bid for projects worth more than
Rs 50,000mn. The robust order book provides the company with revenue visibility
in the longer term.
Diversification of business: In 2008, MIIL established Man Infraprojects, a subsidiary
to enter Real Estate, Hospitality and Infrastructure sector. The company has more than
1.5 million sq.ft of saleable land in Mumbai and Indore. Man Infraprojects possesses
more than 900,000sq.ft. of saleable land in the prime areas in and around Mumbai.
The company’s ongoing projects are located at Bandra and Vile Parle in Mumbai and
at Nerul in Navi Mumbai. The Mumbai projects are of commercial in nature and are
expected to be completed by Q4FY11.
The company’s flagship project in Nerul which is commercial and residential in nature
is expected to be completed by FY12-13. MIIL also has more than 600,000 sq.ft. of
saleable land in Indore. Also, any value unlocking of Man Infraprojects in the future
has the potential to make the Balance sheet stronger.
Foray into International Markets: MIIL has plans to expand in strategically
important international markets, like Middle East and in emerging markets like Africa
which have significant oil and gas reserves and high potential for large pipeline
projects. It has even established a regional office in the U.A.E. and intends to focus
on projects in the Middle East region and a certain African countries.
Healthy Net worth: MIIL has a total equity shareholders’ funds of ` 418.47 crores
having reserves worth ` 389.73 crores. This translates into a Book value per share of
` 78.17 as on FY10 end. At a CMP of ` 77, MIIL looks undervalued.
Valuations
At the CMP of 77, the stock is trading at 3.82x its TTM EPS of 20.16 and 0.99x its
BV of 78.17. The stock looks attractive due to its strong order book and probable
value unlocking from its saleable area in prime locations of Mumbai and Indore.
Technical View
The Stock is in a correction mode. The major supports for the stock are around 70 and
65. The resistance for the stock is around 80, 84 and 87 levels. A closing above 80
will generate fresh buy signal for the stock. We recommend accumulating the stock at
lower levels around its support levels with a medium perspective for a target of ` 87/-
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