Viewpoint

MOIL Limited
Weak results; Valuations remain attractive

MOIL Limited’s (MOIL) PAT at Rs. 89 crore (down 15.7% y-o-y; down
Sector: Metal & Mining
2.3% q-o-q) was substantially below our estimates on account of miss in
Result Update manganese ore sales volume at 0.25 million tonne (down 18.6% y-o-y;
down 10.9% q-o-q) and lower EBITDA margin at Rs. 3,285/tonne (down
Change 30.2% y-o-y; down 15.8% q-o-q) due to the sharp decline in realisation
View: Positive  given fall in international manganese ore prices. MOIL’s valuation
seems attractive at 2.5x its FY2021E EV/EBITDA, which is at 41%
CMP: Rs. 142 discount to its historical average one-year forward EV/EBITDA multiple
Upside potential: 15%  of 4.2x. Moreover, MOIL has a strong balance sheet with cash and cash
equivalents at Rs. 2,261 crore as on September 30, 2019 (62% of current
á Upgrade  No change â Downgrade market capitalisation), which provides room for higher dividend payout
and share buybacks (recently MOIL’s board of directors announced to
buy back shares not exceeding 2 crore equity shares or 7.9% of the total
Company details outstanding equity shares at price of Rs. 152/share). Hence, we maintain
our Positive view on MOIL and expect a 15% upside.
Market cap: Rs. 3,650 cr
Key positives
52-week high/low: Rs. 182/118
ŠŠ Better cost-control measures reflected in a 19.6% y-o-y decline in
NSE volume: (No of operating expenses.
2.0 lakh
shares) ŠŠ Lower-than-expected effective income tax rate at 15% in Q2FY2020.

BSE code: 533286 Key negatives

ŠŠ Decline in manganese ore sales volume by 18.6% y-o-y to 0.25 million
NSE code: MOIL tonne.
Sharekhan code: MOIL Our Call
Valuation – Maintain Positive view on MOIL; Expect a 15% upside: We
Free float: (No of
shares)
8.8 cr have lowered our FY2020E and FY2021E earnings estimates for MOIL to
factor in lower manganese ore realisations (given the fall in international
prices of manganese ore) and marginally lower sales volume assumption.
Shareholding (%) MOIL’s valuation seems attractive at 2.5x its FY2021E EV/EBITDA, which
is at 41% discount to its historical average one-year forward EV/EBITDA
Promoters 65.7
of 4.2x, and offers healthy dividend yield of ~4%. Moreover, MOIL has a
FII 3.5
strong balance sheet with cash and cash equivalents at Rs. 2,261 crore
as on September 30, 2019 (62% of current market capitalisation), which
DII 13.8 provides room for higher dividend payout and share buybacks (recently
MOIL’s board of directors announced to buy back shares not exceeding
Others 17.0 2 crore equity shares or 7.9% of the total outstanding equity shares at
price of Rs. 152/share). Hence, we maintain our Positive view on MOIL and
expect a 15% upside.
Price chart
200
Key Risks
175 Lower-than-expected manganese ore prices could affect the company’s
profitability and our view on the stock.
150

125 Valuation Rs cr
Particulars FY17 FY18 FY19 FY20E FY21E
100
Revenue 982 1,323 1,441 1,287 1,401
Jul-19
Mar-19
Nov-18

Nov-19

OPM (%) 30.1 40.2 41.4 30.9 31.7

Adjusted PAT 306 422 474 408 451
Price performance
% YoY growth 76.8 38.0 12.3 -14.0 10.7
(%) 1m 3m 6m 12m Adjusted EPS (Rs) 11.9 16.4 18.4 15.8 17.5
P/E (x) 11.9 8.7 7.7 9.0 8.1
Absolute 0.7 12.9 0.8 -15.2 P/B (x) 1.3 1.3 1.2 1.1 1.0
EV/EBITDA (x) 5.3 2.8 2.3 3.2 2.5
Relative to
-1.9 4.5 -5.9 -26.2 RoNW (%) 9.8 15.1 16.1 12.7 12.9
Sensex
RoCE (%) 14.7 23.0 24.4 16.9 17.3
Sharekhan Research, Bloomberg Source: Company; Sharekhan estimates

November 19, 2019 7

 Viewpoint
Sharp miss in PAT due to lower manganese ore sales volume and realisation and higher depreciation
partially offset by lower tax rate and higher other income

For Q2FY2020, MOIL reported an operating profit of Rs. 83 crore (down 43.2% y-o-y; down 25% q-o-q), below
our estimate of Rs. 129 crore. The miss in operating profit was due to lower-than-expected manganese ore
sales volume at 0.25 million tonne (down 18.6% y-o-y; down 10.9% q-o-q) and EBITDA margin of Rs. 3,285/
tonne (down 30.2% y-o-y; down 15.8% q-o-q vs. our estimate of Rs. 3,922/tonne). Profit after tax (PAT) declined
by 15.7% y-o-y (down 2.3% q-o-q) to Rs. 89 crore, below our estimate of Rs. 125 crore due to lower than
expected operating profit and higher depreciation partially offset by lower tax rate and higher other income.
We highlight here that the company has opted for lower corporate tax rate of 25.2%.

Results Rs cr
Particulars Q2FY20 Q2FY19 YoY % Q1FY20 QoQ %
Net Sales 253 358 -29.3 280 -9.6
Total Expenditure 170 211 -19.6 169 0.4
Reported operating profit 83 146 -43.2 111 -25.0
Adjusted operating profit 83 146 -43.2 111 -25.0
Other Income 53 45 18.0 49 9.1
EBITDA 136 191 -28.8 160 -14.5
Interest 0 0 0
Depreciation 32 16 104.2 19 63.8
Exceptional income/(expense) 0 0 NA 0 NA
Reported PBT 104 176 -40.6 140 -25.4
Adjusted PBT 104 176 -40.6 140 -25.4
Tax 16 71 -77.6 49 -67.9
Reported PAT 89 105 -15.7 91 -2.3
Adjusted PAT 89 105 -15.7 91 -2.3
Equity Cap (cr) 26 26 26
Reported EPS (Rs.) 3.4 4.1 -15.7 3.5 -2.3
Adjusted EPS (Rs.) 3.4 4.1 -15.7 3.5 -2.3
Margins (%) BPS BPS
Adjusted OPM 32.8 40.9 -805.3 39.6 -671.7
Adjusted NPM 35.0 29.4 563.3 32.4 263.2
Source: Company; Sharekhan Research

Key operating metrics Rs cr

Particulars Q2FY20 Q2FY19 YoY % Q1FY20 QoQ %
Manganese ore sales volume (million tonne) 0.25 0.31 -18.6 0.28 -10.9
Manganese ore realisation (Rs./tonne) 9,200 10,444 -11.9 9,333 -1.4
Blended EBITDA (Rs./tonne) 3,285 4,704 -30.2 3,901 -15.8
Source: Company; Sharekhan Research

November 19, 2019 8

 Viewpoint
Outlook
Weakness in international manganese ore price to impact realisation; Decent volume growth outlook:
International manganese ore prices have corrected by 20% to $6.9/dmtu in FY2020 till date, as compared
to $8.6/dmtu in FY2019. Hence, we expect manganese ore realisations to be lower for MOIL in H2FY2020.
However, likely improvement in the grade of manganese ore would arrest the decline in realisation to some
extent. We expect manganese ore production and sales volumes to report a 5.2% CAGR over FY2019-
FY2021E backed by decent demand growth from the steel sector. MOIL is targeting to achieve manganese
ore production of 1.48 million tonne (mt) in FY2020E (13% y-o-y growth despite high base of FY2018 and
FY2019) and has prepared a strategic plan to enhance its production to 2 mtpa by 2021, 2.5 mtpa by 2025,
and 3 mtpa by 2030, with cumulative capex of Rs. 2,500 crore by 2030. We have not factored in likely EPS
accretion in our FY2020E EPS and FY2021E EPS due to recently announced share buyback program by the
company..
Valuation
Maintain Positive view on MOIL with 15% upside potential: We have lowered our FY2020E and FY2021E
earnings estimates for MOIL to factor in lower manganese ore realisations (given the fall in international
prices of manganese ore) and marginally lower sales volume assumption. MOIL’s valuation seems attractive
at 2.5x its FY2021E EV/EBITDA, which is at 41% discount to its historical average one-year forward EV/EBITDA
of 4.2x, and offers healthy dividend yield of ~4%. Moreover, MOIL has a strong balance sheet with cash and
cash equivalents at Rs. 2,261 crore as on September 30, 2019 (62% of current market capitalisation), which
provides room for higher dividend payout and share buybacks (recently MOIL’s board of directors announced
to buy back shares not exceeding 2 crore equity shares or 7.9% of the total outstanding equity shares at price
of Rs. 152/share). Hence, we maintain our Positive view on MOIL and expect a 15% upside.

One-year forward EV/EBITDA (x) band

9.0
8.4x
8.0

7.0

6.0

5.0

4.0 4.2x
3.0

2.0

1.0
1.3x
0.0
Feb-17

Sep-17

Feb-19

Sep-19
Nov-18
May-17

May-19
Dec-17
Oct-16
Apr-16

Apr-18
Jul-16

Jul-18

EV/EBITDA Avg. EV/EBITDA Peak EV/EBITDA Trough EV/EBITDA

Source: Sharekhan Research

November 18, 2019 9

 Viewpoint
About company
MOIL Limited, erstwhile Manganese Ore (India) Limited, is India’s largest manganese ore producer with
production of 1.3 million tonne (mt) in FY2019. MOIL operates 10 mines, of which six are located in the Nagpur
and Bhandara districts of Maharashtra and four in Balaghat district of Madhya Pradesh. The company holds
strong manganese ore reserve base of 81.5 mt and holds a 49% market share in overall manganese ore
production in India. MOIL has a prospecting license over a total of 1,743.8 hectares of leased area, of which
704.2 hectares are in Maharashtra and 1,039.6 hectares are in Madhya Pradesh. An area of 814.7 hectares
has been reserved by the Maharashtra government in favour of MOIL for prospecting manganese ore in the
Nagpur and Bhandara districts of Maharashtra and the state government of Madhya Pradesh has reserved
372.7 hectares in favour of MOIL in the Balaghat district for prospecting of manganese ore.

Investment theme
MOIL is well placed to capitalise on the decent domestic steel demand growth as it holds strong reserves and
a resource base of 81.5 mt. To meet the rising demand of manganese ore for the steel industry, MOIL has set an
aggressive manganese ore production target of 2 mt by 2021, 2.5 mt by 2025, and 3 mt by 2030. Moreover, the
company is attractively valued, offers a healthy dividend yield and has a strong balance sheet.

Key Risks
Lower-than-expected manganese ore prices could affect the company’s profitability and our view on the stock.

Additional Data
Key management personnel
M.P. Chaudhari Chairman & Managing Director
Rakesh Tumane Director - Finance
D. S. Shome Director - Production & Planning
Source: Company Website

Top 10 shareholders
Sr. No. Holder Name Holding (%)
1 Republic of India 65.7
2 Life Insurance Corp of India 7.1
3 State of Madhya Pradesh India 5.0
4 State of Maharashtra 4.7
5 Sun Life Financial Inc. 2.4
6 United India Insurance Co. Ltd. 1.1
7 Dimensional Fund Advisors LP 0.9
8 BNP Paribas Asset Management India 0.7
9 Invesco Asset Management India Pvt. Ltd. 0.2
10 New Zealand Superannuation Fund 0.2
Source: Bloomberg

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

November 19, 2019 10

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