Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Mishra Dhatu Nigam - Execution outlook remains strong - ICICI Securities

Posted On: 2020-11-19 21:56:28 (Time Zone: Arizona, USA)


Mishra Dhatu Nigam (Midhani) highlighted that despite the slowdown in space launches, and space revenue mix falling to 40% in FY21E, it does not expect any material change in margins. This is mainly due to the high-margin maraging steel comprising of 70-80% of revenue mix in FY21E (similar to FY20) and titanium alloys also increasing their revenue contribution. Management expects to cross FY20 revenues in FY21; all the melt shops are running at full utilisation to achieve the same. With the current utilisation stretched through the year, Rs10bn revenue target for FY22 appears realistic. Also, as focus on indigenisation grows, the management expects to substitute high-value super alloy imports of ~Rs7bn p.a. (current revenue contribution from the same at Rs500mn-600mn p.a.). Super alloys yield higher realisations compared even to maraging steels. Maintain BUY with a target price of Rs280/share.

- Orderbook and order inflow. Current orderbook is at Rs16.9bn against Rs17.3bn QoQ. Q2FY21 saw Rs1.6bn of order booking. Midhani has previously guided for FY21 order inflow at Rs7.5bn, 70% of which would be from defence. A large part of the inflow may accrue from Akash (allotted to BDL), the future expected order of Tejas (titanium alloys - another high-value order, which can help maintain margins similar to space orders), etc. Of the total orderbook of Rs16.9bn, 60% is from space, 30% from defence and 10% from other sectors.

- Space to constitute 40% of FY21E revenues; Midhani aims at commercial and defence aerospace as the next prospective area of supply. Space launches planned for CY20 have been deferred. Midhani expects some deferments of orders and volumes by one year. Presence in multiple sectors is expected to overcome this decline; defence ordering has picked pace. More importantly, the proportion of maraging steel in the mix is not decreasing with the shift, implying limited impact on margins.

- JV with NALCO. The JV has completed land acquisition and applied for environmental clearances. Company has been finalising the mode of funding - given longer gestation period, equity participation will be initially infused by JV parties or financial investors. Requirement of aluminium alloy can be met with this JV, which will take care of demand from aerospace, defence, transportation, and electrical vehicles in future. It will take one more year to place orders with equipment manufacturers, and another three years to commission.

- Capex guidance. Company has maintained its capex guidance of Rs2bn p.a. for FY21/FY22. Rohtak plant (~Rs600mn), spring plant (Rs270mn), wide plate mill and core capacity debottlenecking remain the key areas of capex.

- Bhabha Kavach: There has been considerable requirement of bullet-proof jackets from CRPF and their performance has been good. With many varieties available in the market, there is no consensus on bullet proof jackets among the buyers, which has dampened the expected 100,000 units p.a. demand. Also, with the cost on higher side, buyers are not able to push the product for procurement. Midhani has received an order for 400-500 units, which has been fulfilled. Company also stated it is not in a position to supply 100,000 jackets p.a. Midhani will start a new plant in Rohtak from FY22 at a total capex of Rs600mn, through which it will be able to manufacture 30k-40k bullet proof jackets p.a. with a probable pricing of Rs100,000-120,000/jacket.

Valuation methodology and key risks

We maintain BUY on Midhani with a target price of Rs280/share (22x FY22E P/E). Effectively, we have assumed a postponement of Rs2bn worth of revenues on account of Covid pandemic.

Sensitivity: If Midhani can reclaim ~Rs1bn of postponed revenues, FY22E EBITDA and PAT would increase by 10% and so would our target price.

Shares of Mishra Dhatu Nigam Ltd was last trading in BSE at Rs.191.6 as compared to the previous close of Rs. 193.3. The total number of shares traded during the day was 17537 in over 527 trades.

The stock hit an intraday high of Rs. 196.1 and intraday low of 191. The net turnover during the day was Rs. 3392547.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Maintain ADD on Symphony - Domestic in line; RoW improving - HDFC Securities

Maintain ADD on Multi Commodity Exchange - Taking a pause; recovery awaited - HDFC Securities

Maintain ADD on DCB Bank - Provisioning cushion emerges ahead of expectations - HDFC Securities

Maintain BUY on Birla Corporation - Margin buoyancy continues - HDFC Securities

ADD on SRF - Returning to normalcy - HDFC Securities

HDFC Securities - Maintain BUY on UltraTech Cement - Solid show!

Ajanta Pharma (Initiating Coverage) - Gearing for the next leap - HDFC Securities

BUY on SBI Life Insurance - Growth returns - HDFC Securities

Kajaria Ceramics (Initiating Coverage) - Galloping ahead - HDFC Securities

UltraTech Q3 FY21 - YES Securities

HDFC Life Q3 FY21 - YES Securities

SBI Life - Q3 FY21 - YES Securities

Aavas Financiers Q3 FY21 - Conference Call Takeaways - YES Securities

Birla Corp Q3 FY21 - YES Securities

ADD on Reliance Industries - Sailed through the tough times! - HDFC Securities

Grasim Industries - Aspiring for strong no.2 position in paints - ICICI Securities

Kewal Kiran Clothing - Better execution with flat EBITDA YoY - ICICI Securities

Mphasis - DXC will continue to be key in the near term - ICICI Securities

HDFC Securities: Indian Chemical Sector (Sector Update) - Steering well through the pandemic!

UltraTech Cement - Earnings upgrade continues; ripe for rerating - ICICI Securities

Multi Commodity Exchange of India - Lower turnover impacted operating performance - Q3FY21 - ICICI Securities

SBI Life Insurance Company - Strong performance, attractive valuations (<2 FY23 P/EV) - ICICI Securities

Biocon Limited - Slow recovery in biosimilars - ICICI Securities

HDFC Life Insurance Company - Not only - but also - about protection - ICICI Securities

DCB Bank - Gradually approaching normalcy - ICICI Securities

Aurobindo Pharma - Approval for 3 products under PLI Scheme - ICICI Securities

Yes Bank - Aggravating asset quality fears outweigh operating performance turnaround - ICICI Securities

JSW Steel - Peak margins expected in Q4FY21 - ICICI Securities

Aavas Financiers - Quality intact; premium to sustain - ICICI Securities

Supreme Industries - Q3FY21 First Cut - ICICI Direct

Polycab India Ltd - Q3FY21 First Cut - ICICI Direct

DCB Bank - Q3FY21 First Cut - ICICI Direct

Q3FY21 Result update - Symphony Ltd. - ICICI Direct

Ultratech Cement - Q3FY21 First Cut - ICICI Direct

Oberoi Realty - Q3FY21 First Cut - ICICI Direct

HDFC Life Insurance - Q3FY21 First Cut - ICICI Direct

SRF Limited - Chemical biz's good performance may continue - ICICI Securities

Multi Commodity Exchange of India - Lower turnover impacted operating performance - ICICI Securities

Q3FY21 Company update - Zensar Technologies - ICICI Direct

JSW Steel - Q3FY21 First Cut - ICICI Direct

Q3FY21 Result update - Biocon Ltd - ICICI Direct

Symphony Ltd - Q3FY21 First Cut - ICICI Direct

Crompton Greaves Consumer Electricals - Q3FY21 First Cut - ICICI Direct

Q3FY21 Result update - Bajaj Finserv - ICICI Direct

Q3FY21 Result update - Bajaj Auto - ICICI Direct

Quant Pick - Hero MotoCorp - ICICI Direct

Company update - Cyient Ltd - Q3FY21 - ICICI Direct

Covid Recovery Pulse - Auto retail taper off in new year 2021 - ICICI Direct

Q3FY21 Result update - Asian Paints - ICICI Direct

Company update - Mphasis Ltd - Q3FY21 - ICICI Direct



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020