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MOIL Ltd: Poor volumes drag profits
Sep 10, 2014

MOIL Limited has announced its results for the quarter ended June 2014. The company has reported a 16% YoY decline in net sales and 5.3% YoY fall in net profits for the quarter ended June 2014. Here is our analysis of the results.

Performance summary
  • The company's topline has declined by 16% YoY. For the quarter ended the company produced 2.73 lakh tonnes of manganese ore as compared to 2.52 lakh tonnes in 1QFY14.
  • Operating profits declined by 15.5% YoY. Operating margins for the quarter stood at 49.1% as compared to 48.8% in 1QFY14.
  • At the bottomline level, net profits declined by 5.3% YoY. The fall in profits was curtailed by a 15.7% YoY increase in other income.

Financial performance snapshot
(Rs m) 1QFY14 1QFY15 Change
Sales 2,389 2,006 -16.0%
Expenditure 1,223 1,021 -16.5%
Operating profit (EBDITA) 1,166 985 -15.5%
Operating profit margin (%) 48.8% 49.1%  
Other income 614 710 15.7%
Depreciation 82 88 7.1%
Interest 0 0 NA
Profit before tax 1,697 1,607 -5.3%
Tax 577 546 -5.3%
Profit after tax/(loss) 1,120 1,061 -5.3%
Net profit margin (%) 46.9% 52.9%  
No. of shares (m)   168  
Diluted earnings per share (Rs)   6.3  
P/E ratio* (x)   10.4  
* On a trailing 12 months basis

What has driven performance in 1QFY15?
  • MOIL Limited has reported a 16% YoY decline in net sales for the quarter ended June 2014. The sales volume for 1QFY15 stood at 2.15 lakh tonnes, a fall of 16.7% YoY. Realizations also fell 2.9% YoY and stood at Rs 8,403 per tonne.

  • At the operating level, during 1QFY15, the profits declined by 15.5% YoY, however, margins were more or less constant. The overall expenditure declined 16.5% YoY due to fall in cost of raw materials.

  • Net profits declined by 5.3% YoY.
What to expect?
Though the production levels increased marginally by 8.3% YoY, sales volumes (-16.7% YoY) and realizations (-2.9% YoY) were muted for the quarter hurting topline growth. Going forward, we expect a modest rise in production and sales volumes, despite revival in the steel industry due to a threat from imports. It may be noted that about half of India's manganese ore requirements were met through imports last year.

At the current price of Rs 313, the stock is trading at a multiple of 10.4 times its trailing twelve month earnings. Though the company has aggressive expansion plans in place to reach about 2 m tons of production levels by FY20-21 (from 1.1 m in FY14) threat from imports and regulatory risks will continue to remain an overhang. As a result, we recommend investors to buy the stock at lower levels. 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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