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Man enough to post handsome returns….
MAN Industries’ Q2FY11 numbers were better than our estimates.
Topline growth (up ~34% YoY and ~25% QoQ) was aided by robust
volumes in both segments, viz. LSAW volumes up ~5% QoQ and ~96%
YoY and HSAW volumes up ~55% QoQ and ~5% YoY. Blended
realisations also remained firm at | 53544/tonne against | 50000/tonne
in Q1FY11. EBITDA margins improved by 520 bps YoY but remained
subdued QoQ (down ~300 bps QoQ) due to increased raw material cost
(up ~32% QoQ and ~41% YoY) on account of an increase in steel
prices, thus taking away the sheen from an otherwise good
performance. PAT jumped seven fold YoY and ~14% QoQ partially due
to unrealised forex gains of | 11.40 crore. We maintain a cautiously
positive outlook based on order visibility and execution concerns in the
piping industry and maintain our ADD rating with a target price at | 106.
Sales volumes give added push
The company continued to maintain its good run rate with volumes
expanding in both segments viz. LSAW volumes (up ~5% QoQ and
~96% YoY) at 44,389 tonnes in Q2FY11 vs. 42,138 tonnes in
Q1FY11 and 22,646 tonnes in Q2FY10. HSAW volumes also rose (up
~55% QoQ and ~5% YoY) at 33,780 tonnes in Q2FY11 against
21,723 tonnes in Q1FY11 and 32,209 tonnes in Q2FY10.
Order book remains firm at | 2000 crore
As on September 30, 2010, the order book stands approximately at |
2000 crore slated to be executed in the next 12-15 months compared
to | 1500 crore as on June 30, 2010.The company’s major focus is
on export markets like Middle East, South East Asia and Africa.
Valuation
At the CMP of | 97, the stock is trading at 5x FY12E EPS of | 19.3. Despite
a stable order book position, concerns remain on the margin and
execution front. We would like to remain cautious at this point of time.
We have valued the stock at 5.5x FY12EEPS to arrive at a target price of |
106 per share. We have assigned an ADD rating to the stock.
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