Monnet Ispat (MNET.BO, Buy, PT Rs 730, 51% upside) UBS: India Mid-Caps TOP PICKS - September 2011

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• Robust historical growth -- FY06-FY11 Revenue /PAT at 24% /
22% CAGR.
• 290mt minable coal reserves, operates largest underground
mine in India. Raw material backward integration to drive
profitability and shareholder value.
• Expansion at existing Raigarh plant -- Equipment ordered and
on site. 80MW power plant & 1.5m mt steel capacity to
commission in FY12 and FY13.
• Angul (Orissa) power expansion (1050 MW) --Land/approvals in
place; financing tied up; Captive coal. Completion expected in
FY14.
• Has raised capital for power expansion in Angul (Orissa).
• Shareholding: promoters – 50%
• Valuation: SOTP methodology based on multiple based
approach. We 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.

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