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MOIL Ltd: Strong realization boosts topline - Views on News from Equitymaster

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MOIL Ltd: Strong realization boosts topline

Jun 23, 2014

MOIL Limited has announced its results for the quarter ended March 2014. The company has reported a 9.4% YoY increase in net sales and 35.7% YoY growth in net profits for the quarter ended March 2014. Here is our analysis of the results.

Performance summary
  • The company's topline has increased by 9.4% YoY. For the quarter ended the company produced 3.4 lakh tonnes of manganese ore as compared to 3.37 lakh tonnes in 4QFY13.
  • Operating profits increased by 49.4% YoY as expenditure fell by 18.3% YoY. Operating margins for the quarter stood at 56% as compared to 41% in 4QFY13.
  • At the bottomline level, net profits increased by 35.7% YoY due to strong performance at the operating level and 16.3% YoY increase in other income. For the full year ended profits were up by 18% YoY.
  • For FY14, Board recommends a total dividend of Rs 7.5 per share.
  • The company continues to remain debt free at the end of FY14.

Financial performance snapshot
(Rs m) 4QFY13 4QFY14 Change FY13 FY14 Change
Sales 2,668 2,920 9.4% 9,671  10,213 5.6%
Expenditure 1,575 1,286 -18.3% 5,326 5,201 -2.3%
Operating profit (EBDITA) 1,094  1,634 49.4% 4,345 5,012 15.3%
Operating profit margin (%) 41.0% 56.0%   44.9% 49.1%  
Other income 602 700 16.3% 2,353 3,033 28.9%
Depreciation 89 95 7.0% 330 352 6.5%
Interest 0 0 NA 0 0 NA
Profit before tax 1,607  2,239 39.4% 6,368 7,693 20.8%
Tax 506 745 47.4% 2,051 2,598 26.7%
Profit after tax/(loss) 1,101  1,494 35.7% 4,317 5,096 18.0%
Net profit margin (%) 41.3% 51.1%   44.6% 49.9%  
No. of shares (m)         168  
Diluted earnings per share (Rs)         30.3  
P/E ratio* (x)         10.4  
* On a trailing 12 months basis

What has driven performance in 4QFY14?
  • MOIL Limited has reported a 9.4% YoY increase in net sales for the quarter ended March 2014. The sales volume for 4QFY14 stood at 3.28 lakh tonnes with realization being Rs 8,631 per tonne. For the full year sales were up by 5.6% YoY. While the total sales volume fell by 5% YoY to 11.33 lakh tonnes, realizations improved by 11.8% YoY to Rs 8,351 per tonne in FY14.

    Break-up of operating costs
    (Rs m) 4QFY13 4QFY14 Change FY13 FY14 Change
    Raw Materials 60 70 16.2% 243 258 5.9%
    % of sales 2.3% 2.4%   2.5% 2.5%  
    Changes in inventory 106 (101) NA 280 66 -76.4%
    % of sales 4.0% -3.5%   2.9% 0.6%  
    Employee costs 775 564 -27.2% 2,620 2,561 -2.3%
    % of sales 29.0% 19.3%   27.1% 25.1%  
    Other Expenditure 633 753 18.9% 2,182 2,316 6.2%
    % of sales 23.7% 25.8%   22.6% 22.7%  
    Total operating expenditure 1,575 1,286 -18.3% 5,326 5,201 -2.3%
    % of sales 59.0% 44.0%   55.1% 50.9%  

  • At the operating level, during 4QFY14, the company's total expenditure declined by 18.3% YoY due to 27.2% YoY decline in employee costs. However due to higher sales, EBITDA increased by 49.4% YoY. EBITDA margin for the quarter stood at 56%.

  • Net profits improved by 35.7% YoY during the quarter on the back of 16.3% YoY rise in other income. For the full year profits were up by 18% YoY.
What to expect?
While both production and sales were muted for the year, a sharp rise in realization by 11.8% YoY supported topline growth. However, a gradual appreciation of the INR against the USD makes MOIL vulnerable from threat of cheap imports. While we expect MOIL's realizations to remain stable in FY15 considering the sharp rise that was witnessed in FY14, we may have to revisit our estimates for the next year.

At the current price of Rs 315, the stock is trading at a multiple of 10.4 times its trailing twelve month earnings. Due to a steep rise in stock price in the last one quarter valuations are no longer attractive. As a result, we recommend investors to HOLD on to 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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