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MOIL Ltd: Profits up on higher sales
Jun 11, 2013

MOIL Limited has announced its results for the quarter ended March 2013. The company has reported a 32.3% YoY increase in net sales and 10.7% YoY growth in net profits for the quarter ended March 2013. Here is our analysis of the results.

Performance summary
  • The company's topline has increased by 32.3% YoY.
  • Operating profits improved by 27.2% YoY while operating margins declined by 1.7% YoY.
  • At the bottomline level, net profits increased by 10.7% YoY while net profit margins decreased by 8% YoY.
  • For the full year ended March 2013, net sales increased by 7.5% YoY while net profits increased by 5.1% YoY.
  • The company has also declared a final dividend of Rs 3.5 per share in addition to an interim dividend of Rs 2 per share for the financial year 2012-13. This takes the total dividend for FY13 to Rs 5.5 per share.

Financial performance snapshot
(Rsm) 4QFY12 4QFY13 Change FY12 FY13 Change
Net sales 2,016 2,668 32.3% 8,996 9,671 7.5%
Expenditure 1,156 1,575 36.2% 4,664 5,326 14.2%
Operatingprofit (EBDITA) 860 1,094 27.2% 4,332 4,345 0.3%
Operatingprofit margin (%) 42.7% 41.0%   48.2% 44.9%  
Otherincome 629 602 -4.3% 2,033 2,353 15.7%
Interest(net) - -   - -  
Depreciation 85 89 4.2% 299 330 10.4%
Profitbefore tax 1,404 1,607 14.4% 6,066 6,368 5.0%
ExceptionalItem - -   - -  
Tax 410 506 23.4% 1,959 2,051 4.7%
Profitafter tax/(loss) 994 1,101 10.7% 4,108 4,317 5.1%
Netprofit margin (%) 49.3% 41.3%   45.7% 44.6%  
No. ofshares (m)         169  
Dilutedearnings per share (Rs)         25.5  
P/E ratio(x)*         8.0  
* On a trailing 12 months basis

What has driven performance in 4QFY13?
  • MOIL Limited has reported a 32.3% YoY increase in net sales for the quarter ended March 2013 due to higher volumes and realizations. Volumes increased by 18.7% YoY to 355,955 tonne, while realizations increased by 29.5% YoY to Rs 8,132/tonne.

    Break-up of operating costs
    (Rs m) 4QFY12 4QFY13 Change FY12 FY13 Change
    Raw Materials 42  60 42.1% 183  243 32.7%
      % of sales 2.1% 2.3%   2.0% 2.5%  
    (Increase)/Decrease in inventory of finished goods  (24)  106 -535.7% 192  280 45.7%
      % of sales -1.2% 4.0%   2.1% 2.9%  
    Employee costs  628  775 23.4% 2,361  2,620 11.0%
      % of sales 31.1% 29.0%   26.2% 27.1%  
    Other Expenditure  510  633 24.0% 1,927  2,182 13.2%
      % of sales 25.3% 23.7%   21.4% 22.6%  
    Total operating expenditure 1,156  1,575 36.2% 4,664  5,326 14.2%
      % of sales 57.3% 59.0%   51.8% 55.1%  

  • At the operating level, during 4QFY13 the company's total expenditure increased by 36.1% YoY due to higher raw material and staff costs which led to the EBITDA margin dipping by 165 bp YoY to 41.0%.

  • Other income decreased by 4.2% YoY while the tax rate increased to 31.5% compared to 29.2% in 4QFY12. Consequently, the net profit increased by only 10.9% YoY.

What we expect?
Currently, MOIL has beneficiation plants of 0.4 m tonne at Dongri Buzurg mine and of 0.5 m tonne at Balaghat mine to upgrade the quality of ore produced. MOIL intends to expand its value-added capacity and, thus, has entered into JVs with SAIL and Rashtriya Ispat Nigam Ltd (RINL) to set up two ferro alloy plants in Chhattisgarh and Andhra Pradesh. The proposed installed capacity in case of the JV with SAIL is 106,000 tonne and that in case of RINL is 57,500 tonne.

After a steep decline in manganese ore prices over past two years, MOIL's realizations have increased during 4QFY13. Going forward, we do not foresee any meaningful downside in manganese ore prices over the coming one year.

MOIL has started expanding its existing mines to augment its production capacity to 1.5 m tonne by FY16 from 1.1 m tonne in FY12. Although the company expects flat sales volumes during FY14, it expects higher volume growth from FY15.

At the current price of Rs 205, the stock is trading at a multiple of 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 stock comprises more than 5% of your portfolio.

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