Adhunik Metaliks:Mining and power to lead the way: ICICI Sec

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Adhunik Metaliks



Mining and power to lead the way…
Adhunik Metaliks’ Q2FY11 results came in a tad lower than our
estimates. The topline remained flat at | 378 crore (up ~1% YoY and
down ~11% QoQ) against expected | 390 crore. On the revenue front,
the iron and steel segment contributed ~| 344 crore growing just 0.4%
YoY. OMML’s revenues grew by a robust 56% YoY at | 65 crore due to
higher manganese ore sales volumes and realisations. Consolidated
EBITDA improved by ~630 bps YoY but declined by ~840 bps QoQ due
to higher raw material costs for coke and iron ore. Consolidated PAT for
Q2FY11 came in at | 32 crore against expected | 43 crore (up ~31% YoY
and down ~42% QoQ) due to higher interest cost (up ~38% YoY). With
the ramping up of mining activities both in iron ore and manganese ore
and commissioning of the 540 MW power plant by March 2012, we
maintain our positive outlook on the company and revise our target
price to | 132, with a BUY rating.


􀂃 OMML - a shining star in the portfolio
OMML reported robust revenue growth of ~56% YoY backed by
higher manganese ore sales volumes and robust sales realisations.
Despite a poor show from the iron ore segment due to extended
monsoons impacting iron ore mining activities, overall EBIT margins
for the segment improved by ~626 bps YoY driven by higher sales
realisation. A further ramp-up of iron ore production with
commissioning of the pellet plant and mining operations at Suleipat
iron ore mines is likely to improve volumes, going ahead.

􀂃 Adhunik Power and Natural Resources (APNRL) project on track
APNRL got equity infusion of ~| 125 crore from Macquarie SBI
Infrastructure Investments and SBI for setting up a 540 MW power
plant that is expected to be commissioned by March 2012. The first
unit will be commissioned by January ‘12 and second by March ‘12.

Valuation
At the CMP of | 111, the stock is trading at FY12E P/E of 3.8x and FY12E
EV/EBITDA of 3.5x on a consolidated basis. We have valued the stock at
3.5x FY12E consolidated EV/EBITDA and added | 30.4/share value from
investment into its power subsidiary APNRL to arrive at our revised target
price of | 132. We maintain our BUY rating on the stock.