4QFY2013 Result Update | Mining

May 27, 2013

MOIL
Performance Highlights
Quarterly Highlights (Standalone) (` cr) Net Sales EBITDA % margin Net Profit 4QFY13 267 109 41.0 110 4QFY12 202 86 42.6 99 yoy (%) 32.3 27.2 (165)bp 10.9 3QFY13 228 115 50.3 114 qoq (%) 16.9 (4.7) (929)bp (3.0)

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Mining 3,409 (2,276) 0.8 300/199 65,010 10 20,031 6,083 MOIL.BO MOIL@IN

`203 `248
12 Months

Source: Company, Angel Research

For 4QFY2013, MOILs net sales were above than expected due to higher-than-expected volumes and realizations, whereas the PAT was in-line with our estimate. We recommend a Buy rating on the stock. Net sales grew 32.3% yoy: During 4QFY2013, MOILs net sales increased by 32.3% yoy to `267cr (above our estimate of `236cr) due to higher volumes and realizations. Volumes increased by 18.7% yoy to 355,955 tonne, while realizations increased by 29.5% yoy to `8,132/tonne. EBITDA margin dips 165bp yoy due to higher input cost: During 4QFY2013 the companys total expenditure increased by 36.1% yoy due to higher raw material and staff costs which led to the EBITDA margin dipping by 165bp yoy to 41.0%. Other income decreased by 4.2% yoy to `60cr while the tax rate increased to 31.5% compared to 29.2% in 4QFY2012. Consequently, the net profit increased by only 10.9% yoy to `110cr which was in-line with our estimate of `113cr. Volume guidance muted: The Company expects sales volumes to remain flat during FY2013-14, although it expects volume growth to pick up from FY2015. Outlook and valuation: After a steep decline in manganese ore prices over past two years, MOILs realizations have increased during 4QFY2013. Going forward, we do not foresee any meaningful downside in manganese ore prices over the coming one year. Although we estimate MOILs sales volumes to increase modestly during FY2013-15, we believe the valuations are attractive at 1.5x FY2015 EV/EBITDA. We value MOIL at 3.0x FY2015 EV/EBITDA and recommend a Buy on the stock with a target price of `248. Key financials (Standalone)
Y/E March (` cr) Net sales % chg Net profit % chg EPS (`) OPM (%) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 80.0 2.9 6.3 10.9

Abs. (%) Sensex MOIL

3m 4.6

1yr 23.5

3yr 20.2 -

(16.5) (24.8)

Note: MOIL was listed on Dec. 15, 2010

FY2012 900 (21.1) 411 (32.8) 24.5 48.2 8.3 1.4 18.0 17.2 1.5 3.0

FY2013E 967 7.5 432 5.1 25.7 44.9 7.9 1.2 16.6 15.0 1.2 2.6

FY2014E 1,010 4.4 451 4.4 26.8 46.5 7.6 1.1 15.4 14.5 1.0 2.1

FY2015E 1,046 3.6 484 7.4 28.8 47.6 7.0 1.0 14.7 13.7 0.7 1.5

Bhavesh Chauhan
Tel: 022- 3935 7800 Ext: 6821 bhaveshu.chauhan@angelbroking.com

Vinay Rachh
Tel: 022- 39357800 Ext: 6841 vinay.rachh@angelbroking.com

Please refer to important disclosures at the end of this report

MOIL | 4QFY2013 Result Update

Exhibit 1: 4QFY2013 performance(Standalone)

Y/E March (` cr) Net sales Raw material % of net sales Staff cost % of net sales Other expenditure % of net sales Total expenditure % of net sales Operating profit OPM (%) Other operating income EBIDTA EBITDA margins (%) Interest Depreciation Other income Exceptional items Profit before tax % of net sales Tax % of PBT Profit after tax
Source: Company, Angel Research

4QFY13 267 17 6.2 77 29.0 63 (23.7) 157 59.0 109 41.0 109 41.0 9 60 161 60.2 51 31.5 110

4QFY12 202 2 0.9 63 31.1 51 25.3 116 57.4 86 42.6 86 42.6 9 63 140 69.6 41 29.2 99

% yoy 32.3 824.4 23.4 24.0 36.1 27.2

3QFY13 228 6 2.5 (61) (26.7) (58) (25.5) (113) (49.7) 115 50.3 -

% qoq 16.9 193.5 (227.0) (209.0) (238.8) (4.7)

FY2013 967 52 5.4 262 27.1 218 22.6 533 55.1 435 44.9 -

FY2012 900 37.6 4.2 236 26.2 193 21.4 466 51.8 433 48.2 433 48.2 30 203 607 67.4 196 32.3 411

% yoy 7.5 39.3 11.0 13.2 14.2 0.3

27.2

115 50.3 -

(4.7)

435 44.9 -

0.3

4.2 (4.2) 14.5 (13.4) 23.4 10.9

(8) 64 170 74.7 (57) (33.4) 114

(205.2) (6.0) (5.7) (189.0) (3.0)

33 235 637 65.8 205 32.2 432

10.4 15.7 5.0 (2.4) 4.7 5.1

Exhibit 2: 4QFY2013 Actual vs Angel estimates

(` cr) Net sales EBITDA EBITDA margin (%) PAT
Source: Company, Angel Research

Actual 267 109 41.0 110

Estimates 236 113 47.9 113

Variation (%) 13.1 (3.2) (690)bp (2.6)

May 27, 2013

MOIL | 4QFY2013 Result Update

Result highlights
Net sales grew 32.3% yoy
During 4QFY2013, MOILs net sales increased by 32.3% yoy to `267cr (above our estimate of `236cr) due to higher volumes and realizations. Volumes increased by 18.7% yoy to 355,955 tonne, while realizations increased by 29.5% yoy to `8,132/tonne.

Exhibit 3: Average realization stood at `8,132/tonne

400,000
350,000 300,000 7,993

6,279

6,940 7,728

8,132

10,000
9,000 8,000 7,000 5,000 4,000 3,000

8,852

200,000 150,000

100,000 50,000
0 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Sales volumes
Source: Company, Angel Research

2,000
1,000 0 Realization - RHS

EBITDA margin dips 165bp yoy due to higher input cost

During 4QFY2013 the companys total expenditure increased by 36.1% yoy due to higher raw material and staff costs which led to the EBITDA margin dipping by 165bp yoy to 41.0%. Other income decreased by 4.2% yoy to `60cr while the tax rate increased to 31.5% compared to 29.2% in 4QFY2012. Consequently, the net profit increased by only 10.9% yoy to `110cr which was in-line with our estimate of `113cr.

Exhibit 4: EBITDA margin stood at 41.0%

140 60.0

120
100

44.7

45.7 42.6

42.2

47.1

50.3

41.0

50.0

40.0
30.0

(` cr)

60
40

111

109
86

102

108

115

109

20.0

20
0 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 EBITDA
Source: Company, Angel Research

10.0
0.0 EBITDA margin - RHS

May 27, 2013

(%)

80

(` /tonne)

(tonnes)

250,000

6,000

MOIL | 4QFY2013 Result Update

Investment rationale
Adding value-added capacity through JVs
Currently, MOIL has beneficiation plants of 0.4mn tonne at Dongri Buzurg mine and of 0.5mn 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 1,06,000 tonne and that in case of RINL is 57,500 tonne.

Sales volumes to increase post FY2014

MOIL has started expanding its existing mines to augment its production capacity to 1.5mn tonne by FY2016 from 1.1mn tonne in FY2012. Although the company expects flat sales volumes during FY2014, it expects higher volume growth from FY2015.

May 27, 2013

MOIL | 4QFY2013 Result Update

Outlook and valuation

After a steep decline in manganese ore prices over past two years, MOILs realizations have increased during 4QFY2013. Going forward, we do not foresee any meaningful downside in manganese ore prices over the coming one year. Although we estimate MOILs sales volumes to increase modestly during FY2013 15, we believe the valuations are attractive at 1.5x FY2015 EV/EBITDA. We value MOIL at 3.0x FY2015 EV/EBITDA and recommend a Buy on the stock with a target price of `248.

Exhibit 6: EPS Angel forecast vs. consensus

Year (`) FY2014E FY2015E
Source: Company, Angel Research

Angel forecast 26.8 28.8

Bloomberg consensus 26.9 28.8

Variation (%) (0.2) 0.1

Exhibit 7: Recommendation summary

Companies CMP (`) Target price (`) Reco. Mcap (` cr) Upside P/E (x) P/BV (x) EV/EBITDA (x) RoE (%) RoCE (%) (%) FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E

NMDC Coal India MOIL

119 314 203

155 345 248

Buy Accum. Buy

49,816 204,776 3,409

31 10 22

7.9 12.2 7.6

7.3 11.5 7.0

1.4 3.8 1.1

1.2 3.0 1.0

3.7 7.5 2.1

3.1 6.4 1.5

18.9 35.0 15.4

17.7 29.3 14.7

20.8 19.9 14.5

21.0 18.8 13.7

Source: Company, Angel Research

Company Background
Incorporated in 1962, MOIL is the largest producer of manganese ore by volume (~50% of Indias production) in India with a capacity of 1.1mn tonne and reserves of 22mn tonne (constituting 16% of Indias manganese reserves). Based on its current production, its mine life stands at 21 years. The company produces high, medium and low-grade manganese ore. All its mines are located in Maharashtra and Madhya Pradesh. MOIL is also actively involved in exploration and development activities to increase its reserves.

May 27, 2013

MOIL | 4QFY2013 Result Update

Profit & loss statement(Standalone)

Y/E March (` cr) Net Sales Other operating income Total operating income % chg Total Expenditure Net Raw Materials Other EBITDA % chg (% of Net Sales) Depreciation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Inc/(Expense) PBT after extraordinary items Tax (% of PBT) Extraordinary (Expense)/Inc. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2010 969 969 (25.0) 369 264 105 601 (35.1) 62.0 25 575 (36.1) 59.4 130 18.4 705 (30.3) 0 705 240 34.1 (1) 464 (30.5) 48.0 27.7 27.7 (30.5) FY2011 FY2012 1,140 1,140 17.6 350 (32) 382 790 31.5 69.3 33 758 31.7 66.4 145 16.1 903 28.0 903 292 32.3 611 31.4 53.6 36.4 36.4 31.4 900 900 (21.1) 467 38 429 433 (45.2) 48.2 30 403 (46.8) 44.8 203 33.5 607 (32.8) 607 196 32.3 411 (32.8) 45.7 24.5 24.5 (32.8) FY2013 FY2014E 967 967 7.5 531 52 479 435 0.3 44.9 33 402 (0.4) 41.5 235 36.9 637 5.0 637 205 32.2 432 5.1 44.6 25.7 25.7 5.1 1,010 1,010 4.4 541 38 502 469 8.0 46.5 35 435 8.3 43.0 232 34.8 666 4.6 666 216 32.3 451 4.4 44.6 26.8 26.8 4.4 FY2015E 1,046 1,046 3.6 548 15 533 498 6.2 47.6 38 461 6.0 44.0 255 35.6 716 7.4 716 232 32.3 484 7.4 46.3 28.8 28.8 7.4

May 27, 2013

MOIL | 4QFY2013 Result Update

Balance sheet (Standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Shareholders Funds Total Loans Deferred tax liabilities Long Term liabilities Long Term Provisions Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Deferred tax assets Long Term Loans and advances Other Non Current Assets Current Assets Cash Loans & Advances Other current assets Current liabilities Net Current Assets Total Assets 357 160 197 22 0.2 1,742 1,487 63 192 272 1,471 1,690 396 190 206 29 2 0.8 4.6 2,199 1,880 78 241 257 1,942 2,185 423 216 207 39 4 7 1 6 2,480 2,088 98 293 229 2,250 2,514 543 249 294 39 4 7 1 6 2,719 2,284 108 326 233 2,486 2,836 723 283 439 39 4 7 1 6 2,915 2,421 119 375 233 2,682 3,178 823 321 502 39 4 7 1 6 3,229 2,661 131 437 234 2,995 3,553 168 1,509 1,677 13 1,690 168 1,960 2,128 1 54 1 2,185 168 2,273 2,441 72 1 2,514 168 2,596 2,764 72 1 2,836 168 2,937 3,105 72 1 3,178 168 3,312 3,480 72 1 3,553 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

May 27, 2013

MOIL | 4QFY2013 Result Update

Cash flow statement (Standalone)

Y/E March (` cr) Profit before tax Depreciation Change in working capital Less: Other income Direct taxes paid Cash flow from operations (Inc.)/ Dec. in fixed assets (Inc.)/ Dec. in investments Other income Cash flow from investing Issue of equity Inc./(Dec.) in loans Dividend paid Cash flow from financing Inc./(Dec.) in cash Opening cash bal. Closing cash bal. FY2010 FY2011 707 25 (103) (127.5) 238 264 (23) (0) 124.2 101 (110) (110) 255 1,232 1,487 880 33 (29) 0.2 303 580 (49) (2) (51) (137) (137) 393 1,487 1,880 FY2012 607 30 (83) 0.6 204 350 (42) (2) (44) (98) (98) 209 1,880 2,088 FY2013E 637 33 (40) 205 425 (120) (120) (109) (109) 196 2,088 2,284 FY2014E 666 35 (59) 216 426 (180) (180) (109) (109) 137 2,284 2,421 FY2015E 716 38 (73) 232 449 (100) (100) (109) (109) 240 2,421 2,661

May 27, 2013

MOIL | 4QFY2013 Result Update

Key ratios(Standalone)
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV/Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio (%) Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory (days) Receivables (days) Payables (days) WC. cycle (days) 2.8 51 28 21 (25) 3.0 75 25 25 7 2.2 70 34 23 45 2.0 64 33 25 69 1.6 64 33 25 84 1.4 64 33 25 104 38.0 31.0 39.1 32.1 17.2 18.0 15.0 16.6 14.5 15.4 13.7 14.7 59.4 65.9 6.3 244.9 244.9 66.4 67.7 4.5 202.0 202.0 44.8 67.7 2.5 74.8 74.8 41.5 67.8 2.0 55.7 55.7 43.0 67.7 1.5 44.9 44.9 44.0 67.7 1.3 37.8 37.8 27.7 27.7 29.1 5.6 99.8 36.4 36.4 38.3 126.7 24.5 24.5 26.2 145.3 25.7 25.7 27.7 5.0 164.5 26.8 26.8 28.9 5.0 184.8 28.8 28.8 31.1 5.0 207.2 7.3 7.0 2.0 2.8 2.0 3.2 1.1 5.6 5.3 1.6 1.3 1.9 0.7 8.3 7.7 1.4 1.5 3.0 0.5 7.9 7.3 1.2 2.5 1.2 2.6 0.4 7.6 7.0 1.1 2.5 1.0 2.1 0.3 7.0 6.5 1.0 2.5 0.7 1.5 0.2 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

May 27, 2013

MOIL | 4QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

MOIL No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

May 27, 2013

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