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Robust top-line performance: For 2QFY2012, Monnet Ispat (MIL) reported net
sales growth of 27.1% yoy to `459cr. Growth was mainly driven by the 30.8%
increase in sponge iron realization to `21,002/tonne and the 43.7% yoy increase
in structural steel realization to `32,176/tonne. Net realization on power sales
dipped by 32.1% yoy to `2.9/unit during the quarter.
EBITDA grew by 14.1% yoy: Raw-material cost as a percentage of sales increased
to 59.8% in 2QFY2012 compared to 56.1% in 2QFY2011. Hence, EBITDA
increased by only 14.1% yoy to `119cr, while EBITDA margin contracted by
298bp yoy to 26.1%. Net profit grew by 17.3% yoy to `77cr during the quarter.
Progress on captive coal blocks satisfactory: MIL had received stage-II of forest
clearance for its Utkal mine (reserves of 117mn tonnes) during 2QFY2012. The
company will now sign the mining lease for Utkal coal block since it has received
all approvals. The company expects to sign the mining lease for Mandakini coal
block in 2HFY2013. The company reiterated that both the coal blocks would be
ready for production before the completion of the power plant.
Outlook and valuation: MIL is on the verge of a massive expansion in its steel
business. The long-term stock performance will be determined by the timely
expansion of the 1.5mtpa steel plant and unlocking of value in Monnet Power,
which is implementing the 1,050MW power project. Although there could be
some delays in the commencement of these projects, most of these projects would
be backed by captive resources, thus ensuring robust profitability. Hence,
we recommend Buy on the stock with a target price of `528.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Robust top-line performance: For 2QFY2012, Monnet Ispat (MIL) reported net
sales growth of 27.1% yoy to `459cr. Growth was mainly driven by the 30.8%
increase in sponge iron realization to `21,002/tonne and the 43.7% yoy increase
in structural steel realization to `32,176/tonne. Net realization on power sales
dipped by 32.1% yoy to `2.9/unit during the quarter.
EBITDA grew by 14.1% yoy: Raw-material cost as a percentage of sales increased
to 59.8% in 2QFY2012 compared to 56.1% in 2QFY2011. Hence, EBITDA
increased by only 14.1% yoy to `119cr, while EBITDA margin contracted by
298bp yoy to 26.1%. Net profit grew by 17.3% yoy to `77cr during the quarter.
Progress on captive coal blocks satisfactory: MIL had received stage-II of forest
clearance for its Utkal mine (reserves of 117mn tonnes) during 2QFY2012. The
company will now sign the mining lease for Utkal coal block since it has received
all approvals. The company expects to sign the mining lease for Mandakini coal
block in 2HFY2013. The company reiterated that both the coal blocks would be
ready for production before the completion of the power plant.
Outlook and valuation: MIL is on the verge of a massive expansion in its steel
business. The long-term stock performance will be determined by the timely
expansion of the 1.5mtpa steel plant and unlocking of value in Monnet Power,
which is implementing the 1,050MW power project. Although there could be
some delays in the commencement of these projects, most of these projects would
be backed by captive resources, thus ensuring robust profitability. Hence,
we recommend Buy on the stock with a target price of `528.
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