monnet ispat result updated

7/31/2019 Monnet Ispat Result Updated

1/12

Please refer to important disclosures at the end of this report 1

EBITDA 138 129 7.5 125 10.4

EBITDA margin (%) 25.8 28.9 (308)bp 26.0 (26)bp

Source: Company, Angel Research

Monnet Ispat (MIL) reported robust top-line

performance for 4QFY2012. The companys top line grew by 20.4% yoy to

`536cr mainly due to increased realizations of sponge iron, which grew by

23.2% yoy to `24,159/tonne.The companys structural steel sales volumes grewby 25.7% yoy to 21,065 tonnes, while power sales volumes declined by 23.5%

yoy to 180mn units. Net realization on power sales grew by 14.3% yoy and 2.7%

qoq to `3.6/unit during the quarter.

Raw-material costs as a percentage of sales

increased to 59.8% in 4QFY2012 compared to 55.7% in 4QFY2011. Average

iron ore cost increased by 3.1% yoy and 7.8% qoq to `6,761/tonne in

4QFY2012. Hence, EBITDA increased only by 7.5% yoy to `138cr, while EBITDA

margin contracted by 308bp yoy to 25.8%. Interest expenses increased by 34.2%

yoy to `24cr, while other income increased by 97.5% yoy to `13cr.

Consequently, net profit grew by 8.5% yoy to `83cr.

MIL plans capex of `1,500cr for its

upcoming power plants and `800cr for steel capacity expansion during FY2013.

The implementation of the 1,050MW power plant at Angul has been delayed by

six months and is now expected to be operational in 2HFY2014.

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 could be

some delays in the commencement of these projects, most of these projects

would be backed by captive resources, thus ensuring robust profitability. Hence,

% chg 6.0 21.1 57.3 21.3

% chg (2.2) 8.9 25.1 16.3

EBITDA margin (%) 28.6 26.3 23.7 25.9

P/E (x) 10.3 9.5 7.9 6.8

P/BV (x) 1.4 1.2 1.1 0.9

RoE (%) 14.9 13.8 15.1 15.3RoCE (%) 9.2 7.7 9.2 11.7

EV/Sales (x) 2.8 2.5 1.7 1.3

EV/EBITDA (x) 9.6 9.7 7.3 5.0


CMP `450

Target Price `593

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 49.4

MF / Banks / Indian Fls 3.1

FII / NRIs / OCBs 36.3

Indian Public / Others 11.2

Abs. (%) 3m 1yr 3yr

Sensex (10.3) (11.9) 34.1

MIL (9.9) (12.8) (11.9)

MISP@IN

10

16,328

4,943

MNET.BO

2,888

0.6

561/305

11,582

Steel

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

Face Value (`)

BSE Sensex

Nifty

Reuters Code

Tel: 022- 39357800 Ext: [email protected]

Tel: 022- 39357600 Ext: 6841

[email protected]

Performance highlights

4QFY2012 Result Update | Steel

May 15, 2012


2/12

Monnet Ispat | 4QFY2012 Result Update

May 15, 2012 2

Exhibit 1:4QFY2012 performance (Standalone)

Raw material 321 248 29.2 288 11.4% of net sales 59.8 55.7 - 59.9 -

Staff cost 22 20 10.7 23 (6.7)

% of net sales 4.1 4.4 - 4.9 -

Other expenditure 56 36 55.1 30 88.5

% of net sales 10.5 8.1 - 6.2 -

Total expenditure 399 317 25.8 356 12.1

% of net sales 74.4 71.1 - 74.0 -

OPM (%) 25.6 28.9 - 26.0 -

Other operating income 1 0 - - -

EBITDA margin (%) 25.8 28.9 - 26.0 -

Interest 24 18 34.2 19 28.9

Depreciation 19 18 4.4 19 (1.0)

Other income 13 6 97.5 11 18.5

Exceptional items 0 0 - 0 -

% of net sales 20.1 22.2 - 20.4 -

Tax 25 22 11.0 25 (1.1)

% of PBT 23.0 22.6 - 25.5 -


Robust 4QFY2012 top-line performance

MILs net sales grew strongly by 20.4% yoy to `536cr for 4QFY2012. Growth was

mainly driven by the 23.2% yoy increase in sponge iron realization to

`24,159/tonne. The companys structural steel sales volumes grew by 25.7% yoy

to 21,065 tonnes, while power sales volumes declined by 23.5% yoy to 180mn

units. Net realization on power sales increased by 14.3% yoy and 2.7% qoq to

`3.6/unit during the quarter.

Exhibit 2:Quarterly production volumeSponge iron 190,360 165,857 186,557 194,171 195,609 2.8 0.7

Steel (basic) 20,701 19,075 19,855 21,058 29,284 41.5 39.1

Steel (structural) 18,989 19,005 19,010 18,465 25,012 31.7 35.5

Ferro alloy 2,596 2,173 1,966 2,267 2,587 (0.3) 14.1

Power (mn units) 272 209 238 185 225 (17.3) 21.4



3/12


May 15, 2012 3

Exhibit 3:Quarterly sales volumeSponge iron 155,196 150,578 159,906 160,521 157,998 1.8 (1.6)

Steel (basic) - - 664 2,680 2,476 - (7.6)Steel (structural) 16,756 17,086 17,255 19,862 21,065 25.7 6.1

Ferro alloy 2,604 1,542 2,049 2,034 2,147 (17.5) 5.6

Power (mn units) 235 175 176 172 180 (23.5) 4.4


Exhibit 4:Quarterly average realizationSponge iron 19,617 19,776 21,002 21,004 24,159 23.2 15.0

Steel (basic) - - 25,904 30,741 30,845 - 0.3

Steel (structural) 31,357 31,693 32,176 33,197 35,174 12.2 6.0Ferro alloy 54,729 52,270 63,397 39,503 49,539 (9.5) 25.4

Power (`/unit) 3.1 3.4 2.9 3.5 3.6 14.3 2.7


EBITDA grew by 7.5% yoy

Raw-material costs as a percentage of sales increased to 59.8% in 4QFY2012

from 55.7% in 4QFY2011. Average iron ore cost increased by 3.1% yoy and 7.8%

qoq to `6,761/tonne in 4QFY2012. Hence, EBITDA increased only 7.5% yoy to

`138cr, while EBITDA margin contracted by 308bp yoy to 25.8%. Interest expenses

increased by 34.2% yoy to `24cr, while other income increased by 97.5% yoy to`13cr. Consequently, net profit grew by 8.5% yoy to `83cr.

Exhibit 5:EBITDA margin trend


Exhibit 6:Net profit trend


The company plans capex of `1,500cr for its upcoming power plants and `800cr

for steel capacity expansion during FY2013. The implementation of the 1,050MW

power plant at Angul has been delayed by six months and is now expected to be

operational in 2HFY2014.

0

5

10

15

20

25

30

35

0

20

40

60

80

100

120

140

160

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12

(%)

(`c

r)

EBITDA (LHS) EBITDA margin (RHS)

0

5

10

15

20

25

0

10

20

30

40

50

60

70

80

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12

(%)

(`c

r)

Net Profit (LHS) Net margin (RHS)


4/12


May 15, 2012 4

MIL is setting up a 1.5mn steel plantthrough the BF-EAF route. 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-FY2013.

However, full benefits of these facilities would be witnessed in FY2014.

MIL is setting up a1,050MW (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.

MIL had acquired twocoal assets in Indonesia during CY2011, which has potential reserves of 65mn

tonnes. MIL is currently in the process of developing this mine.


5/12


May 15, 2012 5

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 the1,050MW power project. Although there could be some delays in the

commencement of these projects, most of these projects would be backed by

captive resources, thus ensuring robust profitability. Hence,

Exhibit 7:SOTP valuationSteel business 4.0x FY2014E EV/EBITDA 306

Stake in Monnet Power 2.0x P/BV 287


Exhibit 8:EPS Angel forecast vs. consensusFY2013E 57.2 54.8 4.4

FY2014E 66.5 63.4 5.0

Source: Bloomberg, Angel Research


6/12


May 15, 2012 6

Exhibit 9:EV/EBITDA band


Exhibit 10:P/E band


Exhibit 11:P/BV band


0

2,000

4,000

6,000

8,000

10,000

12,000

Apr-08

Jul-08

Oct-08

Jan-0

9

Apr-09

Jul-09

Oct-09

Jan-1

0

Apr-10

Jul-10

Oct-10

Jan-1

1

Apr-11

Jul-11

Oct-11

Jan-1

2

Apr-12

(`

cr)

2x 5x 8x 11x 14x

0

200

400

600

800

1,000

1,200

Jan-0

8

Apr-08

Jul-08

Oct-08

Jan-0

9

Apr-09

Jul-09

Oct-09

Jan-1

0

Apr-10

Jul-10

Oct-10

Jan-1

1

Apr-11

Jul-11

Oct-11

Jan-1

2

Apr-12

(`)

5x 10x 15x 20x

0

100

200

300

400

500

600

700800

900

Apr-08

Jul-08

Oct-08

Jan-0

9

Apr-09

Jul-09

Oct-09

Jan-1

0

Apr-10

Jul-10

Oct-10

Jan-1

1

Apr-11

Jul-11

Oct-11

Jan-1

2

Apr-12

(`)

0.5x 1.0x 1.5x 2.0x


7/12


May 15, 2012 7

Exhibit 12:Recommendation summary

Tata Steel 413 503 Buy 39,630 22 9.7 8.2 1.0 0.9 6.0 4.6 10.8 14.4 9.4 12.3JSW Steel 634 - Neutral 19,068 - 8.5 7.1 0.8 0.7 4.0 3.7 10.7 11.6 11.2 11.5

SAIL 87 102 Buy 35,852 17 6.6 6.0 0.8 0.7 5.9 4.9 12.4 12.3 9.5 11.0



8/12


May 15, 2012 8

Profit & loss statement (Standalone)

Gross sales 1,711 1,567 1,691 2,064 3,225 3,910

Less: Excise duty 162 86 122 163 235 285

Other operating income 3.6 3.0

% chg 33.6 (4.4) 6.2 21.0 57.0 21.3

Net raw materials 911 735 889 1,131 1,547 1,799

Other mfg costs 136 146 0 0 269 326

Personnel 61 73 75 88 164 199

Other 66 62 160 186 299 362

% chg 48.7 23.8 (3.3) 11.2 42.2 32.1

(% of Net sales) 24.2 31.3 28.6 26.3 23.7 25.9

Depreciation 65 72 74 75 118 158

% chg 49.1 26.8 (4.4) 13.1 39.6 31.8

(% of Net sales) 20.0 26.5 23.9 22.3 19.8 21.5

Interest charges 71 74 44 68 132 235

Other income 48 32 30 41 37 33

(% of PBT) 16.6 9.1 8.3 10.4 7.5 5.8

Share in profit of asso. - - - - - 1.0

% chg 29.7 22.1 3.4 9.9 25.1 16.3

Extra. Inc/(Expense) 16 184 - - - -

Tax 55.0 60.4 80 91 114 133

(% of PBT) 20.3 18.2 22.2 22.9 22.9 22.9

Add: Earnings of asso. - - - - - -

Less: Minority interest - - - - - -

Extra. Expense/(Inc.) - - - - - -

% chg 39.4 24.1 (2.2) 8.9 25.1 16.3

(% of Net sales) 15.0 19.4 17.9 16.1 12.8 12.3

% chg 54.6 1.7 (2.2) 8.9 20.2 16.3


9/12


May 15, 2012 9

Balance sheet (Standalone)

Equity share capital 48 54 64 64 64 64Reserves & surplus 1,238 1,592 2,026 2,294 2,640 3,048

Share warrants - 27 - - - -

Minority interest - - 0 - - -

Deferred tax liability 114 120 141 141 141 141

Gross block 1,366 1,439 1,477 3,077 4,077 4,427

Less: Acc. depreciation 240 311 383 458 576 734

Capital work-in-progress 310 721 1,513 713 413 33

Goodwill - - - - - -

Cash 246 205 688 925 785 787

Loans & advances 683 590 853 853 853 853

Other 294 348 550 649 816 909

Current liabilities 232 268 345 387 451 450

Mis. exp. not written off 83 18 - - - -


10/12


May 15, 2012 10

Cash flow statement (Standalone)

Profit before tax 271 331 362 397 497 579

Depreciation 65 72 74 75 118 158Change in working capital (280) 78 (348) (57) (103) (94)

Less: Other income 45 61 (27) - - -

Direct taxes paid 31 64 86 91 114 133

(Inc.)/ Dec. in fixed assets (155) (73) (39) (1,600) (1,000) (350)

(Inc.)/ Dec. in investments (44) (412) (792) 800 300 380

(Inc.)/ Dec. in loans and adv. (77) (330) (5) (250) - -

Other income 6 15 22 - - -

Issue of equity 40 151 10 - - -

Inc./(Dec.) in loans 133 216 1,177 1,000 200 (500)

Dividend paid 28 28 - 38 38 38

Others 69 58 (135) - - -

Inc./(Dec.) in cash (125) (40) 483 237 (140) 2


11/12


May 15, 2012 11

Key ratios

P/E (on FDEPS) 9.9 10.1 10.3 9.5 7.9 6.8P/CEPS 7.3 6.8 8.2 7.6 5.8 4.8

P/BV 1.7 1.5 1.4 1.2 1.1 0.9

Dividend yield (%) 1.1 1.1 1.1 1.1 1.1 1.1

EV/Sales 2.0 2.2 2.8 2.5 1.7 1.3

EV/EBITDA 8.1 6.9 9.6 9.7 7.3 5.0

EV/Total assets 1.1 1.0 0.9 0.8 0.8 0.7

EPS (Basic) 47.4 56.1 47.3 47.6 59.5 69.3

EPS (fully diluted) 45.4 44.7 43.7 47.6 57.2 66.5

Cash EPS 61.9 65.9 55.2 59.3 77.8 93.7

DPS 5.0 5.0 5.0 5.0 5.0 5.0

Book value 268.2 307.1 324.8 366.5 420.2 483.6

EBIT margin 20.0 26.5 23.9 22.3 19.8 21.5

Tax retention ratio (%) 79.7 81.8 77.8 77.1 77.1 77.1

Asset turnover (x) 0.7 0.5 0.4 0.4 0.5 0.6

RoIC (Post-tax) 11.2 11.5 8.0 6.9 8.2 10.2

Cost of debt (post tax) 4.6 4.3 1.6 1.7 2.7 5.0

Leverage (x) 0.7 0.4 0.7 0.8 0.8 0.6

Operating RoE 15.7 14.8 12.4 11.3 12.8 13.2

RoCE (Pre-tax) 12.4 13.0 9.2 7.7 9.2 11.7

Angel RoIC (pre-tax) 16.2 17.3 14.8 11.7 11.8 13.8

RoE 18.2 18.2 14.9 13.8 15.1 15.3

Asset turnover (gross block) 1.2 1.1 1.1 0.8 0.8 0.9

Inventory (days) 80 112 141 135 125 120

Receivables (days) 26 32 44 40 35 32

Payables (days) 50 60 78 75 70 60

WC cycle (days) 49 49 68 74 57 57

Net debt to equity 0.7 0.4 0.7 0.8 0.8 0.6

Net debt to EBITDA 2.3 1.6 3.2 3.9 3.2 1.9

Interest coverage 4.4 5.3 8.6 6.2 4.5 3.3


12/12


May 15 2012 12

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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risks of such an investment.

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Disclosure of Interest Statement Monnet Ispat

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

Note: We have not considered any Exposure below`

1 lakh for Angel, its Group companies and Directors

monnet ispat result updated

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