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1QFY2014 Result Update | Mining

August 10, 2013

MOIL
Performance Highlights
Quarterly Highlights (Standalone) (` cr) Net Sales EBITDA % margin Net Profit

BUY
CMP Target Price
Investment Period
1QFY13 243 102 42.2 99 yoy (%) (1.5) 14.0 666bp 12.7 4QFY13 267 109 41.0 110 qoq (%) (10.5) 6.6 782bp 1.8
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 3,231 (2,281) 0.8 300/182 66,914 10 18,789 5,566 MOIL.BO MOIL@IN

`192 `222
12 Months

1QFY14 239 117 48.8 112

Source: Company, Angel Research

For 1QFY2014, MOILs net sales were in-line with our expectation, whereas the PAT was above our estimate. We recommend a Buy rating on the stock. Net sales declined 1.5% yoy: During 1QFY2014, MOILs net sales decreased by 1.5% yoy to `239cr (in line with our estimate of `241cr) 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 `8,772/tonne. EBITDA margin rises 666bp yoy due to higher realizations: The total expenditure decreased by 12.9% yoy due to lower raw material costs which led to the EBITDA margin rising by 666bp yoy to 48.8%. Other income increased by 17.4% yoy to `61cr and therefore the net profit increased by 12.7% yoy to `112cr. Volume guidance muted: The company maintained that it expects sales volumes to remain flat during FY2014, although it expects volume growth to pick up from FY2015. Outlook and valuation: After a steep decline in manganese ore prices over the past two years, MOILs realizations have increased during the past two quarters. Going forward, we do not foresee any meaningful downside in manganese ore prices over the coming one year, especially considering the INR depreciation against the USD. Although we estimate MOILs sales volumes to increase modestly during FY2013-15, we believe the valuations are attractive at 1.8x FY2015 EV/EBITDA. Net cash per share of `136 (~73% of its market cap) as on March 31, 2013 is likely to withstand downside, if any, in our view. We value MOIL at 3.0x FY2015 EV/EBITDA and recommend a Buy on the stock with a target price of `222. 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) FY2012 900 (21.1) 411 (32.8) 24.5 48.2 7.8 1.3 18.0 17.2 1.3 2.6 FY2013 967 7.5 432 5.1 25.7 44.9 7.5 1.2 16.6 14.9 1.0 2.2 FY2014E 956 (1.2) 425 (1.6) 25.3 42.3 7.6 1.1 14.6 12.3 0.7 1.6 FY2015E 982 2.7 441 3.7 26.2 44.3 7.3 1.0 13.7 12.0 0.8 1.8

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 80.0 3.0 6.1 10.9

Abs. (%) Sensex MOIL

3m (6.0)

1yr 6.8

3yr 3.6 -

(13.5) (27.7)

Note: MOIL was listed on Dec. 15, 2010

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

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

Source: Company, Angel Research; Note: CMP as of 8th August 2013

Please refer to important disclosures at the end of this report

MOIL | 1QFY2014 Result Update

Exhibit 1: 1QFY2014 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

1QFY14 239 7 2.9 67 28.1 48 (20.1) 122 51.2 117 48.8 0 117 48.8 0 8 61 0 170 71.0 58 34.0 112

1QFY13 243 34 13.9 58 24.1 48 19.9 140 57.8 102 42.2 0 102 42.2 0 7 52 0 147 60.7 48 32.4 99

% yoy (1.5) (79.2) 15.2 (0.4) (12.9) 14.0

4QFY13 267 17 6.2 77 29.0 63 (23.7) 157 59.0 109 41.0 0

% qoq (10.5) (57.8) (13.2) (24.2) (22.3) 6.6 6.6 (7.1) 2.0 5.6 14.0 1.8

FY2013 967 52 5.4 262 27.1 218 22.6 533 55.1 435 44.9 0 435 44.9 0 33 235 0 637 65.8 205 32.2 432

FY2012 900 37.6 4.2 236 26.2 193 21.4 466 51.8 433 48.2 0 433 48.2 0 30 203 0 607 67.4 196 32.3 411

% yoy 7.5 39.3 11.0 13.2 14.2 0.3

14.0 11.8 17.4 15.3 17.1 20.8 12.7

109 41.0 0 9 60 0 161 60.2 51 31.5 110

0.3 10.4 15.7 5.0 (2.4) 4.7 5.1

Exhibit 2: 1QFY2014 Actual vs Angel estimates


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

Actual 239 117 48.8 112

Estimates 241 104 43.3 104

Variation (%) (0.9) 11.7 551bp 7.7

August 10, 2013

MOIL | 1QFY2014 Result Update

Result highlights
Net sales declined 1.5% yoy
During 1QFY2014, MOILs net sales decreased by 1.5% yoy to `239cr (in line with our estimate of `241cr) 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 `8,772/tonne.

Exhibit 3: Average realization stood at `8,772/tonne


400,000 350,000 300,000 6,279 6,940 7,728 8,852 8,722 6,994 10,000 9,000 8,000 7,000 5,000 4,000 3,000 2,000 1,000 0 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 Sales volumes
Source: Company, Angel Research

200,000 150,000 100,000 50,000 0 Realization - RHS

EBITDA margin rises 666bp yoy due to lower input cost


During 1QFY2014 the companys total expenditure decreased by 12.9% yoy due to lower raw material costs which led to the EBITDA margin rising by 666bp yoy to 48.8%. Other income increased by 17.4% yoy to `61cr and therefore the net profit increased by 12.7% yoy to `112cr which was above our estimate of `104cr.

Exhibit 4: EBITDA margin stood at 48.8%


140 120 100 45.7 47.1 42.6 42.2 50.3 41.0 48.8 60.0 50.0 40.0 30.0 109 86 102 108 115 109 117 20.0 10.0 0.0 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 EBITDA
Source: Company, Angel Research

(` cr)

60 40 20 0

EBITDA margin - RHS

August 10, 2013

(%)

80

(` /tonne)

(tonnes)

250,000

6,000

MOIL | 1QFY2014 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 1.2mn tonne in FY2013. Although the company expects flat sales volumes during FY2014, it expects higher volume growth from FY2015.

August 10, 2013

MOIL | 1QFY2014 Result Update

Outlook and valuation


After a steep decline in manganese ore prices over the past two years, MOILs realizations have increased during the past two quarters. Going forward, we do not foresee any meaningful downside in manganese ore prices over the coming one year, especially considering the INR depreciation against the USD. Although we estimate MOILs sales volumes to increase modestly during FY2013-15, we believe the valuations are attractive at 1.8x FY2015 EV/EBITDA. Net cash per share of `136 (~73% of its market cap) as on March 31, 2013 is likely to withstand the downside in our view. We value MOIL at 3.0x FY2015 EV/EBITDA and recommend a Buy on the stock with a target price of `222.

Exhibit 6: EPS Angel forecast vs. consensus


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

Angel forecast 25.3 26.2

Bloomberg consensus

Variation (%) (4.2) (2.5)

26.4 26.9

Exhibit 7: Recommendation summary


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

NMDC Coal India MOIL

102 268 192

123 222

Buy Buy

40,459 169,404 3,231

20 16

6.6 10.6 7.6

6.3 9.9 7.3

1.3 2.6 1.1

1.2 2.2 1.0

2.5 4.5 1.6

2.4 3.8 1.8

21.2 33.3 14.6

20.0 33.1 13.7

24.1 19.7 12.3

22.7 19.7 12.0

- Neutral

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.

August 10, 2013

MOIL | 1QFY2014 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 FY2015E 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 5.1 776 776 (19.8) 498 43 455 278 (36.0) 35.8 34 244 (39.2) 31.5 247 50.3 491 (22.9) 491 155 31.6 336 (22.2) 43.3 20.0 20.0 (22.2) 791 791 1.9 530 54 476 260 (6.4) 32.9 37 223 (8.6) 28.2 237 51.5 460 (6.3) 460 146 31.6 315 (6.3) 39.8 18.7 18.7 (6.3)

August 10, 2013

MOIL | 1QFY2014 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 2,514 480 246 234 27 4 15 1 7 2,847 2,277 113 457 275 2,572 2,860 660 280 380 27 4 15 1 7 2,924 2,490 124 310 283 2,642 3,075 1,060 317 743 27 4 15 1 7 2,747 2,248 137 363 285 2,462 3,259 168 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 2,598 2,766 91 3 2,860 168 2,813 2,981 91 3 3,075 168 2,997 3,165 91 3 3,259 FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

August 10, 2013

MOIL | 1QFY2014 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 FY2012 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 1,880 607 30 (83) 0.6 204 350 (42) (2) (44) (98) (98) 209 1,880 2,088 FY2013 637 33 (113) 214 343 (48) (48) (107) (107) 188 2,088 2,277 FY2014E 491 34 143 155 513 (180) (180) (120) (120) 213 2,277 2,490 FY2015E 460 37 (63) 146 289 (400) (400) (131) (131) (242) 2,490 2,248

August 10, 2013

MOIL | 1QFY2014 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 2.1 64 33 25 86 1.7 64 33 25 89 1.1 64 33 25 76 38.0 31.0 39.1 32.1 17.2 18.0 14.9 16.6 12.3 14.6 12.0 13.7 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 1.9 54.0 54.0 38.8 68.8 1.6 42.8 42.8 40.5 68.8 1.2 33.4 33.4 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 5.5 164.6 25.3 25.3 27.3 5.5 182.7 26.2 26.2 28.4 6.0 201.2 6.9 6.6 1.9 2.9 1.8 2.9 1.0 5.3 5.0 1.5 1.2 1.7 0.6 7.8 7.3 1.3 1.3 2.6 0.5 7.5 6.9 1.2 2.9 1.0 2.2 0.3 7.6 7.0 1.1 2.9 0.7 1.6 0.2 7.3 6.8 1.0 3.1 0.8 1.8 0.2 FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

August 10, 2013

MOIL | 1QFY2014 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.

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%)

August 10, 2013

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