Manganese Ore India IPO - Review + Recommendations

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Subscribe to MOIL IPO: IIFL

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The report says, "MOIL has over four decades of experience in manganese ore mining operations. It enjoys a near monopoly with a dominant 50% share in the domestic manganese production and is also one of the lowest cost producers of manganese ore in the world. MOIL was conferred with ‘Mini Ratna’ status by Government of India in FY08. A debt-free company, it has a healthy balance sheet with strong cash flows. As on H1 FY11, its cash balance stood at Rs17.6bn, which translates into Rs105 per share. It has witnessed revenue and PAT CAGR of 31% and 42% respectively, over the last four years. Presently, it is enjoying OPM of 70.3% and PAT margin of 52.1%. We recommend investors to subscribe the issue."

[jatinrshah]

Emkay Global Financial Services has advised investors to ‘Subscribe’ to the initial public offering of Manganese Ore India. The brokerage expects 40 per cent potential upside in it.

“MOIL is the largest manganese ore producer in India, contributing 50% of the total domestic production. Globally it ranks fifth among all the manganese producers.

The company is among the lowest cost manganese ore producers with an EBITDA margin of ~70% during H1FY11. It has ~22 mt of good quality manganese ore reserves

MOIL is a debt free company with net cash of Rs 105 per share during H1FY11. The company has a planned capex of Rs 7680 million to ramp up its capacity to 1.5 mtpa by FY16

At the upper band of Rs 375, the stock looks attractively valued with potential upside of 40% on 6x FY12E EV/ EBITDA basis,” the report said.

[jatinrshah]

IIFL has advised investors to ‘Subscribe’ to the initial public offering of Manganese Ore India. The company enters the primary markets Friday with issue of 33.6 million shares in the price-band of Rs 340-375 per share.

It plans to raise Rs 11424 – 12600 million via the IPO . The issue closes Wednesday.

“Manganese Ore India has over four decades of experience in manganese ore mining operations. It enjoys a near monopoly with a dominant 50% share in the domestic manganese production and is also one of the lowest cost producers of manganese ore in the world.

MOIL was conferred with ‘Mini Ratna’ status by Government of India in FY08. A debt-free company, it has a healthy balance sheet with strong cash flows.

As on H1 FY11, its cash balance stood at Rs 17.6 billion, which translates into Rs 105 per share. It has witnessed revenue and PAT CAGR of 31% and 42% respectively, over the last four years.

Presently, it is enjoying OPM of 70.3% and PAT margin of 52.1%. We recommend investors to ‘SUBSCRIBE’ to the issue,” the report said.

[RG]

MOIL looks attractive, may see an upside of 40%: Emkay

The report says, "MOIL is the largest manganese ore producer in India, contributing 50% of the total domestic production. Globally it ranks fifth among all the manganese producers. The company is among the lowest cost manganese ore producers with an EBITDA margin of 70% during H1FY11. It has 22 mt of good quality manganese ore reserves. It is a debt free company with net cash of Rs 105 per share during H1FY11. The company has a planned capex of Rs 7680 million to ramp up its capacity to 1.5 mtpa by FY16. At the upper band of Rs 375, the stock looks attractively valued with potential upside of 40% on 6x FY12E EV/ EBITDA basis - recommend subscribe."

Prabhudas Liladhar is of the following view,

Given the strong domestic demand, superior quality mining assets, low cost of operations and strong balance sheet, we strongly believe that stock should command premium to its global peers. We value the stock at an EV/EBITDA of 6x FY12E EBITDA (~18% premium to global average) and arrive at a valuation of Rs495 per share. We recommend ‘Subscribe’ on the stock.

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Centrum has a SUBSCRIBE recommendation with the following note,

MOIL, at the upper band, would trade at P/E of 8.2x and 7.6x for FY12 and FY13 respectively, while EV/EBITDA multiple would stand at 3.8x and 3.0x for the same period. Considering the steady growth plan and attractive valuation, we recommend ‘Subscribe’ to the issue.

Latin Manharlal Securities Pvt. Ltd has the following note,

At the given price band of `340-375, the stock is available at 9.6x-10.6x its post issue TTM EPS of `35.48. Based on 1HFY11 annualised EPS of `39.37, MOIL would trade at 9.5x its upper price band. Given the robust demand outlook for manganese ore and company-specific positives, we recommend Investors to SUBSCRIBE to this issue with a long term view.

Mehta Equities View,

MOIL IPO provides investor an opportunity to invest in the largest producer of manganese ore by volume in India. On valuations parse at the higher side of the price band i.e. Rs 375; the issue is available 13.5 x its FY’10 EPS and 12.2x on lower band price. On P/BV valuation the stock is available at 3.8 and 3.4 times which is available on discount when compared to is domestic & global peers which are trading at 4-5 times. We expect the revenues to grow  substantially in future with improved margins in coming years. Hence, we advice investors should subscribe the IPO considering factors like largest and lowest cost producer of manganese ore, strong cash flows and a debt free company.

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Fairwealth Securities has the following View,

On the price band of Rs 340-375, company is available at P/E of 12.68x on the lower price band and 13.98x on the higher price band based on FY10 earnings. At the book value of Rs.99.84 the stock is priced at P/BV of 3.76x on the higher price band and 3.40x on the lower price band.

MOIL has a net worth of Rs 1860cr and NAV of Rs 110.71/share. We expect the demand of manganese ore to cross 4mt by the first half of FY13. Long term investors can consider the IPO with an expected return of 50-60% with a time horizon of 12-24 months whereas short term investors can expect listing gains of 20-30%.

[RG]

Subscribe MOIL; short term target of Rs 533: MLR Securities

Highlights
The domestic steel demand is likely to grow at a CAGR of 9.2% from FY11 to FY15 resulting in increased demand for Manganese Ore
India has become an importer due to slow development of mines which throws up good opportunity for CAPEX and production growth
Value added products contributes around 8% to the  Revenue at present and the company is  having plans to increase the value added production capacity which will improve the blended realization
Planed CAPEX of 840 Mn in FY11 and 1077 Mn in FY12, strong balance sheet with zero Debt and Cash of Rs 17628 million  (INR 105 per Share)
The offer price of the stock (INR 340 to INR 375) is 9.6 to 10.6 x TTM EPS of Rs 35.5 as of qtr ended Sep10.
Looking at the growth outlook of domestic steel industry and Manganese Ore demand, rich reserves the company has, CAPEX plans, strong balance sheet and peer group valuations, we believe that the company deserves to trade at 15 x TTM EPS of Rs 35.5.

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Way2Wealth Analyst Nisha has the following recommendation,

At the offer price bands, the issue is quoting at a P/E of 8.6-9.5 its annualized H1FY11 earnings. Robust demand for manganese ore resulting from healthy growth in the domestic steel production gives clear and sustainable revenue visibility. Being the largest and lowest cost producer of manganese ore in India along with its low cost competitive advantage puts the Company is a sweet spot. Robust cash flows, debt free status and high return ratios makes the issue attractive. We thus recommend a SUBSCRIBE for the issue for a longer term perspective.

Reliance Money said,

At the upper price band of Rs375/share, MOIL will be trading at a P/E of 9.5x based on FY11 EPS of Rs39.46 (1H FY11 EPS of Rs10.91 annualised) and EV/EBITDA of 7.9x based on FY11 EBITDA of Rs10.1 bn (1H FY11 EBITDA of Rs5.1 bn annualised). We believe the IPO is attractively priced considering peer valuations and recommend a SUBSCRIBE rating to the IPO.

KR Choksey has the following View,

We recommended a “SUBSCRIBE” to the issue on back of the following factors 1) Rich reserves of manganese ore 2) Robust demand for manganese ore on back of strong demand for steel 3) A debt free company 4) Forward integration plans in place. IPO of MOIL is part of the disinvestment program of Govt. of India and the proceeds will be taken by the Government. On the upper price band of ` 375, the stock is priced at an EV/EBIDTA of 4.1 its FY11E, we value the company at an EV/EBIDTA of 5.5 on its FY11E with a price target of ` 502

[chetan]

Valuation of MOIL and Target Price ?

With healthy earnings and being a Debt Free with Rs 105 / Cash per Share on Balance Sheet, MOIL can easily enjoy a VALUATION of Rs 450 on a conservative basis to Rs 475 on a Base Case basis and Rs 500 on Bull Case Basis.

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HSBC has the following Recommendation,

There are no comparable peers for the company for valuation. We are comparing the same with NMDC as it is the largest mineral development company of India and Tata Steel, the peer steel company in India on standalone basis. The demand for manganese is directly related to the steel industry as every 1 tonne of steel requires 3% of manganese. Considering the valuation parameter, we feel the issue is attractively priced. Hence recommend to Subscribe. At price band of Rs 340 – 375, the stock is offered at PE band of 11.7x-12.9x  and EV/EBITDA band of 5.8x-6.6x its FY10 financials.

Angel Broking has the following View,

MOIL, a Miniratna PSU, accounts for nearly 50% of India’s manganese ore production. We recommend Subscribe and Initiate Coverage on the stock with a
Target Price of `461, valuing it at 5x FY2012E EV/EBITDA, as MOIL sells high-to-medium grade manganese ore at market-linked prices, expanding its production capacity at existing mines and is attractively valued as compared to peers.

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Unicon's Views,

MOIL has reported a strong growth in the last three years with a net profit margin of more than 45%. MOIL’s Net worth of INR 20 bn gives it’s a book value of INR 120/share. The company enjoys strong Cash Flow leading to improved cash position with a cash reserve of INR 17 bn in balance sheet. At the upper price band of INR 375, the issue is priced at an FY11e EV/EBITDA of 5x and a PE of 9.5x which is attractive compared to its peers. Considering the dominant position in the industry, its huge capex plan and strong cash position, we recommend investors to subscribe to the stock.

Sunidhi ascribes a price target of Rs 547

We expect MOIL's revenue to grow by 20% CAGR during FY10-FY13E period on account of increasing production and stable realizations. At offer price of `375, MOIL is offered at EV/EBIDTA of 4.4x, 3.2x, and 2.4x of its FY11E, FY12E and FY13E EBIDTA respectively. Considering its dominant position in India we assign a forward multiple of 5.5x to its FY12E EBIDTA of `12.6bn to arrive a fair value of `547.

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Aditya Birla Money's Akhil Jain has the following views,

Given the favourable fundamentals of the manganese ore industry in terms of strong global pricing and India’s net importer status, MOIL’s large size in terms of production and reserves, its low capex requirements and low extraction cost and a strong balance sheet, we believe that MOIL’s IPO has been attractively priced. We believe that MOIL is an excellent long term bet on the natural resources sector and should be part of the core portfolio of an investor. We
recommend SUBSCRIBE, both from a short and long term perspective, to MOIL’s IPO at the higher price band of `375. There is a retail discount of 5%, i.e. ~`18.75/share as well which makes it even more attractive.