Monnet Ispat- PAT for 2QFY11 declined 10% QoQ:: Motilal Oswal

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 Monnet Ispat's adjusted PAT for 2QFY11 declined 10% QoQ to Rs656m (+2% YoY) due to lower sponge iron and
power volumes. The company had undertaken planned maintenance shutdown for older sponge iron kilns during the
quarter, which impacted power generation.

 Net sales declined 14% QoQ (and 15% YoY) to Rs3.61b. Revenue from sponge iron remained flat QoQ (+48% YoY)
at Rs2.5b, as higher realization (up 8% to Rs16,059/tonne) offset volumes. Sales volumes declined 7% QoQ (grew
11% YoY) to 157,026 tonnes. Production declined 7% QoQ to 162,851 tonnes due to shutdown of old kilns.

 Revenue from steel products fell 79% QoQ to Rs116m, as the company produced less steel due to lower margins.
Sales volumes declined 73% QoQ to 5,164 tonnes. Average realization also declined 22% QoQ to Rs22,538/tonne.
 Revenue from the power segment declined 21% QoQ to Rs855m on lower realization and lower sales. Power
realization decreased 12% QoQ (grew 3% YoY) to Rs4.31/unit; the company sold 198MU of excess power in
2QFY11 (down 10% QoQ).
 EBITDA declined 14% QoQ to Rs1.05b. Iron ore costs increased 13% QoQ to Rs5,039/tonne (up 57% YoY).
 Interest costs declined sequentially to Rs119m due to higher interest income (Rs19m) on fixed deposits.
 Other income includes Rs49m of forex gains on outstanding FCCB. The stock trades at rich valuations of 9.6x
FY12E EPS and an EV of 10.4x FY12E EBITDA. Maintain Buy.