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Company Update - Mishra Dhatu Nigam - ICICI Securities

Posted On: 2020-09-15 10:12:51

Mishra Dhatu Nigam (Midhani) reported a subdued set of Q1FY21 numbers. Total operating income for the quarter was at Rs. 113.5 crore (down 14% YoY), while EBITDA was at Rs. 5.8 crore (down 84% YoY). EBITDA margin for Q1FY21 was at 5.1% compared to 27.4% in Q1FY20. The company reported a loss at the PAT level of Rs. 90 lakh for Q1FY21 compared to PAT of Rs. 21.9 crore in Q1FY20. Due to Covid-19 related shutdowns, the operations had to be scaled down for a considerable period in Q1FY21. Though operations resumed during the latter part of the quarter with limited availability of workforce and disrupted supply chain, the restriction imposed affected the company's production, turnover and profit during Q1FY21. However, since the end of May 2020, Midhani's operations have normalised. Going forward, backed by a healthy order book, we expect the company's performance to improve in upcoming quarters. Within the defence segment, government's initiative of indigenisation of imported spares will promote local sourcing and encourage import substitution. This step will benefit the company, as it would encourage it to manufacture products locally, which were earlier imported thereby providing scope for developing new advanced product.

Valuation & Outlook

Midhani's Q1FY21 performance was impacted by Covid-19 related concerns. However, backed by a strong order book position (Rs. 1732 crore as on July 1, 2020), we expect Midhani to report a healthy performance, going forward. We value the stock at 22x FY22E EPS and arrive at a target price of Rs. 260. We assign a BUY recommendation to the stock.

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Shares of Mishra Dhatu Nigam Ltd was last trading in BSE at Rs.210.7 as compared to the previous close of Rs. 209.4. The total number of shares traded during the day was 40468 in over 1137 trades.

The stock hit an intraday high of Rs. 214.4 and intraday low of 209.5. The net turnover during the day was Rs. 8556840.

Source: Equity Bulls

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