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Maharashtra Seamless (MHS)
OW: Geared for the next wave of volume growth
Orders from new seamless pipe mill to be the next trigger
Strong balance sheet and exposure to oil and gas
exploration activity to provide support in a volatile market
We maintain our Overweight rating and INR450 target price
Orders from new seamless pipe to be the next trigger. The new 200k tonnes of
seamless pipe mill is on track for commissioning in the next few days. This new capacity
will enable the company to add 6” pipe to its portfolio, enabling it to compete strongly in
global markets. These new pipes are also likely to earn higher margins compared with the
company’s existing mill, thereby sustaining profitability in a competitive market.
Global environment remains favourable for seamless pipes. While global capital
expenditure has slowed down, the continuous strength in oil prices has ensured that
exploration activities remain robust. This is aptly manifested by increasing rig count,
which is touching new highs, and the continued commitment of global oil majors in
exploration activity. The pipes used in these activities are the primary source of demand
for Maharashtra Seamless.
Strong balance sheet and increasing exposure to international E&P activity to
provide stability in the competitive environment. The company is one of the few
companies in the sector to maintain a cash surplus position. Its intensive and aggressive
marketing approach in increasing its presence in international markets seems to be paying
off. This is likely to be demonstrated in its highest so far seamless sales volume in the
current fiscal year.
Valuation and risks. We roll forward our valuation to FY14e EPS (earlier FY13e) but
maintain our PE multiple of 7.5x. We continue to value investments at a discount of 25%
to reflect uncertainty in usage. Our target price remains INR450, and we maintain our
Overweight rating. Key risks to our rating and target price would be a rapid fall in oil
prices, the imposition of anti-dumping duty on Indian players and removal of antidumping
duty on Chinese players by the US, Brazil, Mexico and Europe.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maharashtra Seamless (MHS)
OW: Geared for the next wave of volume growth
Orders from new seamless pipe mill to be the next trigger
Strong balance sheet and exposure to oil and gas
exploration activity to provide support in a volatile market
We maintain our Overweight rating and INR450 target price
Orders from new seamless pipe to be the next trigger. The new 200k tonnes of
seamless pipe mill is on track for commissioning in the next few days. This new capacity
will enable the company to add 6” pipe to its portfolio, enabling it to compete strongly in
global markets. These new pipes are also likely to earn higher margins compared with the
company’s existing mill, thereby sustaining profitability in a competitive market.
Global environment remains favourable for seamless pipes. While global capital
expenditure has slowed down, the continuous strength in oil prices has ensured that
exploration activities remain robust. This is aptly manifested by increasing rig count,
which is touching new highs, and the continued commitment of global oil majors in
exploration activity. The pipes used in these activities are the primary source of demand
for Maharashtra Seamless.
Strong balance sheet and increasing exposure to international E&P activity to
provide stability in the competitive environment. The company is one of the few
companies in the sector to maintain a cash surplus position. Its intensive and aggressive
marketing approach in increasing its presence in international markets seems to be paying
off. This is likely to be demonstrated in its highest so far seamless sales volume in the
current fiscal year.
Valuation and risks. We roll forward our valuation to FY14e EPS (earlier FY13e) but
maintain our PE multiple of 7.5x. We continue to value investments at a discount of 25%
to reflect uncertainty in usage. Our target price remains INR450, and we maintain our
Overweight rating. Key risks to our rating and target price would be a rapid fall in oil
prices, the imposition of anti-dumping duty on Indian players and removal of antidumping
duty on Chinese players by the US, Brazil, Mexico and Europe.
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