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MOIL Ltd: Profits rise on higher volumes - Views on News from Equitymaster

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MOIL Ltd: Profits rise on higher volumes
Feb 18, 2014

MOIL Limited has announced its results for the quarter ended December 2013. The company has reported a 15.5% YoY increase in net sales and 38.8% YoY growth in net profits for the quarter ended December 2013. Here is our analysis of the results.

Performance summary
  • The company's topline has increased by 15.5% YoY.
  • Operating profits increased by 19.1% YoY while operating margins improved by 2% YoY.
  • At the bottomline level, net profits increased by 38.8% YoY while net profit margins improved by 10% YoY.
  • For the nine month ended December 2013, net sales and net profits increased by 4.1% YoY and 12% YoY.
  • The company has also paid an interim dividend of Rs 4 per share for FY14.

Financial performance snapshot
(Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14
Net sales 2,283 2,636 15.5% 7,003 7,293
Expenditure 1,134 1,268 11.8% 3,751 3,915
Operating profit (EBDITA) 1,148 1,368 19.1% 3,252 3,378
Operating profit margin (%) 50% 52%   46% 46%
Other income 640 1,135 77.2% 1,751 2,334
Interest (net) - -   - -
Depreciation 84 90 6.3% 242 257
Profit before tax 1,704 2,413 41.6% 4,761 5,454
Exceptional Item - -   - -
Tax 569 837 47.2% 1,545 1,852
Profit after tax/(loss) 1,136 1,576 38.8% 3,217 3,602
Net profit margin (%) 50% 60%   46% 49%
No. of shares (m)         169
Diluted earnings per share (Rs)         27.8
P/E ratio (x)*         7.8
* On a trailing 12 months basis

What has driven performance in 3QFY14?
  • MOIL Limited has reported a 15.5% YoY increase in net sales for the quarter ended December 2013 on back of higher realizations and higher volumes. The volumes increased by 2.7% YoY to 290,611 tonne whereas the realizations improved 7.3% YoY to Rs 8,291/tonne.

    Break-up of operating costs
    (Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Raw Materials 77 60 -22.3% 183 188 2.5%
    % of sales 3% 2%   3% 3%  
    (Increase)/Decrease in inventory of finished goods (133) (24) -81.8% 183 188 2.5%
    % of sales -6% -1%   3% 3%  
    Employee costs 610 646 5.9% 1,845 1,997 8.2%
    % of sales 27% 25%   26% 27%  
    Other Expenditure 581 586 0.9% 1,549 1,564 1.0%
    % of sales 25% 22%   22% 21%  
    Total operating expenditure 1,134 1,268 11.8% 3,751 3,915 4.4%
    % of sales 50% 48%   54% 54%  

  • At the operating level, during 2QFY14, the company's total expenditure increased by 11.8% YoY due to higher employee costs. However due to higher sales, EBITDA increased by 19.1% YoY. EBITDA margin expanded by 161 bps YoY to 51.9% due to higher sales.

  • Other income increased by 77.2% YoY to Rs 1,135 m which included a one-time write-back of provision worth Rs 448.4 m. Adjusting for this write back, net profit was flat YoY at Rs 1,129 m.
What to expect?
Manganese ore prices had broadly continued to slide from CY2011 upto June-July 2013. Nevertheless, global manganese prices have risen since then. Moreover, the steep INR depreciation against the USD further cushions MOIL's realizations against the threat of cheap imports. Looking ahead, we now expect MOIL's realizations to remain stable during FY15. Although we estimate MOIL's sales volumes growth to remain muted during FY13-15, we believe the valuations are attractive.

At the current price of Rs 217, the stock is trading at a multiple of 7.8 times its trailing twelve month earnings. We maintain our Buy view on the stock. We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single midcap stock comprises more than 3% of your portfolio.

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