D i s m a l p e r f o r m a n c e …
Adhunik Metaliks’ (AML) Q2FY12 performance was broadly below our
expectation, primarily on the back of subdued EBITDA margins. The
consolidated net sales came in at | 448.0 crore (growth of ~18.3% YoY
and a decline of 3.3% QoQ) as against our expectation of | 393.4 crore.
The iron & steel segment contributed ~| 344.1 crore whereas mining
contributed | 78.9 crore. On the back of higher operating costs, the
consolidated EBITDA came below our estimate at | 80.5 crore (I direct
estimate: | 101.4 crore) registering a dip of ~24.9% YoY and ~44.9%
QoQ. Overall EBITDA margins declined sharply by 1033 bps YoY and
1353 bps QoQ to 18.0% (our estimate: 25.8%). This was mainly due to
higher raw material costs viz. power, iron ore and coal at the standalone
entity wherein the standalone EBITDA margin came at 4.8%.
Furthermore, there was a sharp increase in interest costs (up 69.4% YoY
and 10.7% QoQ) and depreciation charges (25.2% YoY) during the
quarter under review. As a result, the ensuing consolidated loss came in
at ~| 5.5 crore.
ƒ Subdued sales volumes
Sales volumes during the quarter under review were subdued on
the back of a muted demand scenario. In the standalone entity, the
overall sales volumes declined 7% YoY to 84851 tonnes. The
manganese ore sales volumes were also lower by 56.6% QoQ and
54.3% YoY to 18569 tonnes while the sized ore sales volumes were
lower by 28.8% QoQ to 200896 tones.
V a l u a t i o n
We have valued the stock on SOTP basis where we have valued AML at
4.4x FY13E EV/EBITDA, OMML at 4.5x FY13E EV/EBITDA and taken a 20%
holding company discount for valuing investment in power business.
Subsequently we have arrived at a target price of | 37 and maintained our
HOLD rating.
Adhunik Metaliks’ (AML) Q2FY12 performance was broadly below our
expectation, primarily on the back of subdued EBITDA margins. The
consolidated net sales came in at | 448.0 crore (growth of ~18.3% YoY
and a decline of 3.3% QoQ) as against our expectation of | 393.4 crore.
The iron & steel segment contributed ~| 344.1 crore whereas mining
contributed | 78.9 crore. On the back of higher operating costs, the
consolidated EBITDA came below our estimate at | 80.5 crore (I direct
estimate: | 101.4 crore) registering a dip of ~24.9% YoY and ~44.9%
QoQ. Overall EBITDA margins declined sharply by 1033 bps YoY and
1353 bps QoQ to 18.0% (our estimate: 25.8%). This was mainly due to
higher raw material costs viz. power, iron ore and coal at the standalone
entity wherein the standalone EBITDA margin came at 4.8%.
Furthermore, there was a sharp increase in interest costs (up 69.4% YoY
and 10.7% QoQ) and depreciation charges (25.2% YoY) during the
quarter under review. As a result, the ensuing consolidated loss came in
at ~| 5.5 crore.
ƒ Subdued sales volumes
Sales volumes during the quarter under review were subdued on
the back of a muted demand scenario. In the standalone entity, the
overall sales volumes declined 7% YoY to 84851 tonnes. The
manganese ore sales volumes were also lower by 56.6% QoQ and
54.3% YoY to 18569 tonnes while the sized ore sales volumes were
lower by 28.8% QoQ to 200896 tones.
V a l u a t i o n
We have valued the stock on SOTP basis where we have valued AML at
4.4x FY13E EV/EBITDA, OMML at 4.5x FY13E EV/EBITDA and taken a 20%
holding company discount for valuing investment in power business.
Subsequently we have arrived at a target price of | 37 and maintained our
HOLD rating.
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