MOIL produces purely for the Indian domestic market, but Chinese demand for Mn ore is a key driver of Indian Mn prices. While China is the largest producer of Mn ore, it is mostly low-grade and therefore China remains a net importer of the commodity. Prices for Mn ore, a key driver of MOIL’s profitability, have
seen a step change over the last few years, driven by the spike in Chinese steel production.
MOIL has a strong balance sheet with no debt (Dec-10 net cash stands at Rs18bn) and generates robust cash flow. This should support the company’s capex plan of Rs7.7bn over the next 3-4 years to increase production to at least 1.5MT by FY15.
Low cost + large reserves = continued strong margins: price target of Rs490 based on 6x FY12E EV/EBITDA
