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Monnet Ispat
Performance highlights
Quarterly highlights (Standalone)
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit
Source: Company, Angel Research
BUY
CMP Target Price
Investment Period
3QFY12 481 129 26.7 76 yoy (%) (4.7) (9.8) (144)bp (24.8) 2QFY13 547 140 25.6 71 qoq (%) (16.2) (17.0) (27)bp (19.3)
`242 `318
12 Months
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Steel 1,543 2,961 0.5 561/230 5,398 10 19,468 5,887 MNET.BO MISP@IN
For 3QFY2013, Monnet Ispat (MIL) reported a disappointing operating performance. We maintain our Buy rating on the stock. Poor top-line performance: MILs net sales declined by 4.7% yoy to `459cr, mainly due to decrease in volumes in sponge iron and ferro alloys segments, coupled with decrease in realizations of sponge iron and structural steel segments. EBITDA decreases by 9.8% yoy: The companys EBITDA declined by 9.8% yoy to `116cr, while the EBITDA margin contracted by 144bp yoy to 25.3%, mainly due to higher staff cost and other expenditure. Interest and depreciation expenses grew by 53.5% and 16.7% yoy to `29cr and `22cr, respectively. Hence, net profit decreased by 24.8% yoy to `58cr. Steel projects near completion: MIL is on the verge of conducting (or has conducted) trial runs for its various downstream facilities such as plate mill, blast furnace, sinter plant, rebar mill etc. The benefits from these facilities are likely to accrue from 2HFY2014 in our view. 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 have been 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 `318, valuing the steel business at 5.0x FY2014E EV/EBITDA and investment in Monnet Power at 1.5x P/BV. Key financials (Standalone)
Y/E March (` cr) Net sales % chg Adj. net profit % chg EPS (`) EBITDA margin (%) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 49.9 1.3 38.7 10.1
3m 5.4
1yr 7.0
(15.2) (51.4)
FY2011 1,573 6.2 281 (2.2) 43.7 27.8 5.5 0.7 14.9 8.9 1.9 6.7
FY2012 1,897 20.6 289 2.7 44.9 25.0 5.4 0.7 13.0 7.2 2.1 8.3
FY2013E 2,287 20.5 236 (18.2) 35.3 21.8 6.9 0.6 9.6 6.2 1.9 8.5
FY2014E 2,883 26.0 273 15.5 40.7 21.8 5.9 0.6 10.2 7.9 1.4 6.4
Bhavesh Chauhan
Tel: 022- 39357800 Ext: 6821 bhaveshu.chauhan@angelbroking.com
Vinay Rachh
Tel: 022- 39357800 Ext: 6841 Vinay.rachh@angelbroking.com
3QFY13 459 272 59.3 28 6.1 50 10.9 350 76.3 109 23.7 7 116 25.3 29 22 12 77 16.7 19 25.0 58
3QFY12 481 288 59.9 23 4.9 44 9.2 356 74.0 125 26.0 3 129 26.7 19 19 11 102 21.1 25 24.7 76
% yoy (4.7) (5.6) 19.6 12.6 (1.7) (13.2) 114.3 (9.8) 53.5 16.7 9.5 (24.4) (23.4) (24.8)
2QFY13 547 323 59.0 27 4.9 61 11.2 411 75.1 136 24.9 3 140 25.6 30 22 6 94 17.2 22 23.4 71
% qoq (16.2) (15.8) 5.5 (18.1) (14.8) (20.3) (17.0) (3.2) 0.3 93.0 (18.4) (12.8) (19.3)
9MFY2013 1,526 917 60.1 80 5.2 154 10.1 1,151 75.4 375 24.6 17 392 25.7 89 66 23 260 17.0 62 23.8 197
9MFY2012 1,367 810 59.3 66 4.8 103 7.5 1,006 73.6 361 26.4 3 364 26.6 44 56 29 293 21.4 66 22.5 227
% yoy 11.6 13.3 21.2 49.2 14.4 4.0 388.5 7.6 102.8 18.4 (19.4) (11.3) (6.1) (13.2)
(` cr)
(%)
138
136
116
119
129
25.8
26.1
140
60 40 20 0
116
25.3 25.6
26 25 25 24
40 30 20 10 0
1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 EBITDA (LHS) EBITDA margin (RHS)
(%)
80
(` cr)
26
50
Investment rationale
Steel expansion of 1.5mn tonne: MIL is setting up a 1.5mn steel plant through the BF-EAF route. The total capex for the project is pegged at `3,600cr. Various plants including sinter plant, oxygen furnace, steel melting shop and plate mill are expected to begin progressive commissioning in mid-FY2014. However, full benefits of these facilities would be witnessed only from FY2015. Significant value unlocking lies ahead in Monnet Power: MIL is setting up a 1,050MW (2x525) power plant through Monnet Power. The plant is being set up at a cost of `5,000cr, with equity contribution of `1,200cr and the balance being funded through debt. MIL has diluted a 12.5% stake to Blackstone for a consideration of `275cr, thus valuing the total equity stake at `2,200cr. We expect the plant to be operational in 2HFY2014. With captive coal blocks backing this project, we expect robust profitability from the power business. MIL also aims to raise its capacity further by 660MW. However, the company is yet to achieve financial closure for the same. Indonesian coal mine could provide further upsides: MIL had acquired two coal assets in Indonesia during CY2011, which have potential reserves of 65mn tonne. MIL is currently in the process of developing this mine.
Angel
35.3 40.7
Variation (%)
(22.3) (25.3)
(`)
1,000
2,000
3,000
4,000
5,000
7,000 6,000
8,000
9,000
Apr-08
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
11x 8x
Jul-08
Oct-08
5x
Jan-09
2x
0.5x
Source: Bloomberg, Angel Research Source: Bloomberg, Angel Research Source: Bloomberg, Angel Research
Apr-09
Jul-09
Oct-09
10x
5x
Jan-10
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
Apr-10
1.0x
Jul-10
Oct-10
Jan-11
15x
Apr-11
1.5x
Jul-11
Oct-11
Jan-12
Apr-12
2.0x
Jul-12
Jul-12
14x
Jul-12
Oct-12
Oct-12 Jan-13
Oct-12 Jan-13
Jan-13
Company description
Incorporated in 1990, MIL principally manufactures sponge iron (capacity - 1.0mn tonne), ingots (capacity - 0.3mn tonne), structural steel (capacity - 0.2mn tonne) and ferro alloys (capacity - 58ktpa). MIL has a captive coal mine (reserves - 90mn tonne; production - 1.2mn tonne) for production of sponge iron. The companys plants are located in Raipur and Raigarh in Chhattisgarh. It has been allocated several coal blocks such as Gare Palma IV/5, Utkal B2, Urtan North, Rajgamar and Mandakini which are under various stages of clearances.
1,711 162 1,549 1,549 33.6 1,174 911 136 61 66 375 48.7 24.2 65 309 49.1 20.0 71 48 16.6 286 29.7 16 271 55 20.3 216 216 232 39.4 15.0 47.4 45.4 54.6
1,567 86 1,481 1,481 (4.4) 1,017 735 146 73 62 464 23.8 31.3 72 392 26.8 26.5 74 32 9.1 350 22.1 18 331 60 18.2 269 269 288 24.1 19.4 56.1 44.7 (1.7)
1,695 122 1,573 1,573 6.2 1,136 889 75 172 437 (5.8) 27.8 74 363 (7.4) 23.1 31 29 8.1 362 3.4 362 80 22.2 281 281 281 (2.2) 17.9 47.3 43.7 (2.2)
2,060 163 1,897 1,897 20.6 1,423 1,142 95 186 475 8.6 25.0 74 401 10.3 21.1 87 63 16.7 377 4.3 377 88 23.4 289 289 289 2.7 15.2 44.9 44.9 2.7
2,467 180 2,287 24 2,311 21.8 1,813 1,288 199 109 217 498 5.0 21.8 94 405 1.0 17.7 128 32 10.2 308 (18.2) 308 72 23.4 236 236 236 (18.2) 10.3 36.7 35.3 (21.5)
3,110 227 2,883 28 2,910 25.9 2,283 1,616 251 141 274 628 25.9 21.8 103 525 29.7 18.2 208 39 11.1 1.0 356 15.5 356 83 23.4 273 273 273 15.5 9.5 42.4 40.7 15.5
48 1,238 1,286 1,325 114 2,725 1,366 240 1,127 310 216
-
54 1,592 1,646 27 1,495 120 3,289 1,439 311 1,128 721 545
-
64 2,026 2,090 2,606 141 3 4,841 1,477 383 1,094 1,065 550
471
64 2,296 2,360 3,834 150 6 6,351 1,836 457 1,379 2,022 591
443
64 2,495 2,559 4,034 150 6 6,750 2,836 551 2,285 1,722 591
443
64 2,730 2,794 3,534 150 6 6,485 3,186 654 2,532 1,442 591
443
271 65 (280) 45 31 70 (155) (44) (77) 6 (270) 40 133 28 69 75 (125) 371 246
331 72 78 61 64 478 (73) (412) (330) 15 (799) 151 216 28 58 281 (40) 246 205
362 74 (348) (27) 86 (25) (39) (792) (5) 22 (814) 176 1,177 31 1,322 483 205 688
377 74 (67) 29 75 338 (358) (956) (41) 56 (1,300) 1,228 86 1,142 181 663 844
308 94 85 72 415 (1,000) 300 (700) 200 38 162 (123) 806 684
356 103 (56) 83 319 (350) 280 (70) (500) 38 (538) (288) 751 462
10
Key ratios
Y/E March Valuation ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV/Total assets Per share data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book value DuPont analysis EBIT margin Tax retention ratio (%) Asset turnover (x) RoIC (Post-tax) Cost of debt (post tax) Leverage (x) Operating RoE Returns (%) RoCE (Pre-tax) Angel RoIC (pre-tax) RoE Turnover ratios (x) Asset turnover (gross block) Inventory (days) Receivables (days) Payables (days) WC cycle (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest coverage FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E
5.3 3.9 0.9 2.1 1.3 5.4 0.7 47.4 45.4 61.9 5.0 268.2 20.0 79.7 0.7 11.2 4.6 0.7 15.7 12.4 16.2 18.2 1.2 80 26 50 49 0.7 2.3 4.4
5.4 3.7 0.8 2.1 1.4 4.4 0.6 56.1 44.7 65.9 5.0 307.1 26.5 81.8 0.5 11.5 4.3 0.4 14.8 13.1 17.3 18.2 1.1 112 32 60 49 0.4 1.6 5.3
5.5 4.4 0.7 2.1 1.9 6.7 0.6 47.3 43.7 55.2 5.0 324.8 23.1 77.8 0.4 7.8 1.2 0.7 12.2 8.9 13.3 14.9 1.1 141 44 50 76 0.7 3.1 11.7
5.4 4.3 0.7 2.1 2.1 8.3 0.6 44.9 44.9 56.4 5.0 366.8 21.1 76.6 0.4 6.4 2.1 1.0 10.7 7.2 12.2 13.0 1.1 170 34 20 107 1.0 5.0 4.6
6.9 4.7 0.6 2.1 1.9 8.5 0.6 36.7 35.3 51.3 5.0 397.7 17.7 76.6 0.4 5.5 2.5 1.1 8.6 6.2 10.5 9.6 1.0 150 33 40 102 1.1 5.4 3.2
5.9 4.1 0.6 2.1 1.4 6.4 0.6 42.4 40.7 58.4 5.0 434.2 18.2 76.6 0.5 6.8 4.2 0.9 9.0 7.9 11.9 10.2 1.0 140 32 50 79 0.9 4.0 2.5
11
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Monnet Ispat No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
12