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MOIL Ltd: The other income boost - Views on News from Equitymaster

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MOIL Ltd: The other income boost
Aug 23, 2013

MOIL Limited has announced its results for the quarter ended June 2013. The company has reported a 1.5% YoY decrease in net sales and 12.7% YoY growth in net profits for the quarter ended June 2013. Here is our analysis of the results.

Performance summary
  • The company's topline has decreased by 1.5% YoY.
  • Operating profits improved by 14% YoY while operating margins improved by 6.6% YoY.
  • At the bottomline level, net profits increased by 12.7% YoY while net profit margins improved by 5.9% YoY.

Financial performance snapshot
(Rs m) 1QFY13 1QFY14 Change
Net sales 2,426 2,389 -1.5%
Expenditure 1,403 1,223 -12.8%
Operating profit (EBDITA) 1,023 1,166 14.0%
Operating profit margin (%) 42.2% 48.8%  
Other income 523 614 17.4%
Interest (net) - -  
Depreciation 74 82 11.8%
Profit before tax 1,472 1,697 15.3%
Exceptional Item - -  
Tax 477 577 20.8%
Profit after tax/(loss) 994 1,120 12.7%
Net profit margin (%) 41.0% 46.9%  
No. of shares (m)   168  
Diluted earnings per share (Rs)   25.7  
P/E ratio (x)*   7.9  
* On a trailing 12 months basis

What has driven performance in 1QFY14?
  • MOIL Limited has reported a 1.5% YoY decrease in net sales for the quarter ended June 2013 due to lower volumes partially offset by higher realisations. Volumes decreased by 18.1% YoY to 258,000 tonne, while realizations increased by 25.7% YoY to Rs 8,772/tonne.

    Break-up of operating costs
    (Rs m) 1QFY13 1QFY14 Change
    Raw Materials 55 59 6.4%
      % of sales 2.3% 2.5%  
    (Increase)/Decrease in inventory of finished goods 282 12 -95.9%
      % of sales 11.6% 0.5%  
    Employee costs 584 672 15%
      % of sales 24.1% 28.1%  
    Other Expenditure 482 480 -0.4%
      % of sales 19.9% 20.1%  
    Total operating expenditure 1,403 1,223 -12.8%
      % of sales 57.8% 51.2%  

  • At the operating level, during 1QFY14 the company's total expenditure decreased by 12.8% YoY due to lower raw material cost. EBITDA margins improved by 6.6% YoY to 48.8% due to better product mix.

  • Other income increased by 17.4% YoY which led net profits to increase by 12.7% YoY.

What to expect?
MOIL has maintained the prices in 2QFY14 after increasing prices by 9% in 1QFY14.It expects demand to remain stable and will benefit from the Rupee depreciation. MOIL currently has inventory of 66,000 tonnes of Manganese ore. MOIL expects to incur a capex of Rs 2 bn and Rs 4 bn in FY14 and FY15 respectively which we believe is too optimistic given MOIL track record of under achieving the capex targets. MOIL has spent Rs 330 m in Apr-Jul 2013 on increasing the Manganese ore output. It has only incurred Rs 450 m capex in FY12 and FY13 respectively. MOIL expects Manganese ore volumes of 1.15 m tones and 1.2 m tones in FY14 and FY15 respectively.

At the current price of Rs 202, the stock is trading at a multiple of 7.9 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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