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Maharashtra Seamless: Volumes jump

Dec 9, 2014 | Updated on Oct 30, 2019

Maharashtra Seamless has announced the second quarter results of financial year 2014-2015 (2QFY15). While the topline grew by 28% YoY bottomline grew at a faster pace of 73.2% YoY during the quarter.

Performance summary
  • Net sales increase 28% YoY during 2QFY15.
  • Operating profits increase 3.5% YoY while margins erode by 1.7% YoY to 7.4% during the quarter.
  • Despite modest operating performance, net profits increase by 73.2% YoY amidst 111.3% YoY rise in other income and 46.3% YoY fall in depreciation expenses. However, interest expenses increased significantly albeit on a low base
  • The company continues to remain virtually debt free (D/E ratio of 0.004x at the end of 1HFY15)

Financial Snapshot
(Rs m) 2QFY14 2QFY15 Change 1HFY14 1HFY15 Change
Total income 2,844 3,639 28.0% 6,117 6,329 3.5%
Expenditure 2,584 3,371 30.4% 5,529 5,912 6.9%
Operating profit (EBITDA) 260 269 3.5% 588 417 -29.0%
Operating profit margin (%) 9.1% 7.4%   9.6% 6.6%  
Other income 99 210 111.3% 219 422 92.7%
Interest 2 12 395.8% 8 18 131.6%
Depreciation 95 51 -46.3% 189 149 -21.4%
Profit before tax & exceptional items 262 416 58.7% 610 672 10.2%
Tax 60 67 10.4% 133 98 -26.0%
Profit after tax/(loss) 202 349 73.2% 477 574 20.2%
Net profit margin (%) 7.1% 9.6%   7.8% 9.1%  
No. of shares (m)         67.0  
Basic & diluted earnings per share (Rs)         8.6  
P/E ratio (x) *         17.7  
* On trailing 12 month basis

What has driven performance in 2QFY15?
  • Sales increase 28% YoY. The production figures of seamless and ERW pipes stood at 50,457 MT and 17,154 MT respectively. On the other hand, the dispatch figures for seamless and ERW pipes stood at 47,759 MT and 13,280 MT respectively at the end of 2QFY15. Strong volume growth (56.5% YoY growth in production & 35.9% YoY growth in dispatches) of seamless pipes drove topline.

  • Realization of the seamless pipes increased 8% YoY to Rs 60,759 per ton while the same for ERW pipes declined 14.5% YoY to Rs 45,595 per ton.

  • The order book for seamless pipes and ERW pipes stood at Rs 2.79 bn and Rs 1.26 bn respectively at the end of the quarter.

  • Operating profits increase 3.5% YoY during the quarter due to evident cost pressures. EBITDA of ERW pipes fell by 61.4% YoY impacting the growth in profits.

  • Despite a modest performance at the operating level the company reported 73.2% YoY growth in profits due to a 111.3% YoY growth in other income and 46.3% YoY fall in depreciation expenses.
What to expect?
At the current price of Rs 279, the stock trades at around 17.7 times its trailing twelve month earnings. We believe the near term scenario for seamless pipes is expected to be buoyant. With the imposition of safeguard duty on imports of seamless pipes and tubes in the month of August, domestic realizations have improved. This has created a level playing field with Chinese companies who dumped into India till now.

Further, given the government's renewed thrust in the power and infrastructure space, the demand for pipes & tubes is likely to get a boost in the near future. Also, the company is exploring into newer geographies like Mexico, Africa, South America etc to diversify its presence. This shall reduce domestic dependence due to which the company suffered the most in the last 1-2 years. Based on these revival signs, we recommend investors to be patient and 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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Jun 22, 2021 (Close)


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