3QFY2012 Result Update | Mining

February 7, 2012

MOIL
Performance Highlights

REDUCE
CMP Target Price
% chg (yoy) (5.4) (31.9) (1,782)bp (18.9) 2QFY12 248 111 44.7 101 % chg (qoq) (3.5) (1.5) 96bp 0.5

`264 `247
12 months

Particulars (` cr) Net sales EBITDA % margin Net profit

3QFY12 240 109 45.7 102

3QFY11 253 161 63.5 125

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Mining 4,434 1.1 423/217 52,891 10 17,622 5,335 MOIL.BO MOIL@IN

Source: Company, Angel Research

For 3QFY2012, MOILs net sales and EBITDA decreased by 5.4% and 31.9% yoy, respectively, mainly due to a steep decline in manganese ore prices. We recommend a Reduce rating on the stock. Lower realization leads to a decline in the top line: During the quarter, MOILs net sales decreased by 5.4% yoy to `240cr (slightly below our estimate of `248cr) mainly on account of the decrease in average realization (down 20.1% yoy and 1.9% qoq to `7,993/tonne), partially offset by increased sales volume growth (up 19.5% yoy and 5.4% qoq to 285,500 tonnes). Margin shrinks due to lower realization: During the quarter, MOILs EBITDA decreased by 31.9% yoy to `109cr. EBITDA margin dipped by 1,782bp yoy to 45.7% on account of slump in manganese ore prices. Other income, however, increased by 47.8% yoy to `50cr. Consequently, net profit decreased by 18.9% yoy to `102cr, slightly below our estimate of `106cr. Outlook and valuation: Manganese ore prices have gradually slumped by over 40.0% since January 2011 on the back of oversupply in global markets. For 4QFY2012, MOIL has further lowered its prices by 5-20% for various grades. Although the companys sales volumes are expected to witness a CAGR of 8-10% during FY2011-15, we do not foresee any meaningful rise in manganese ore prices in the coming one year. Hence, valuing the stock at 4.5x FY2013E EV/EBITDA, we derive a target price of `247 and recommend Reduce on the stock. Key financials
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)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 80.0 3.3 4.3 12.4

Abs. (%) Sensex MOIL

3m 0.3 4.6

1yr (2.3) (37.1)

3yr 89.5 -

Note: MOIL was listed on Dec. 15, 2010

FY2010 969 (25.0) 466 (32.5) 27.8 62.1 9.5 2.6 31.1 38.1 3.0 4.9

FY2011 1,140 17.6 588 26.3 35.0 67.3 7.5 2.1 30.9 38.5 2.2 3.3

FY2012E 972 (14.8) 408 (30.6) 24.3 46.2 10.9 1.8 17.9 18.5 2.4 5.3

FY2013E 979 0.8 412 1.1 24.6 45.7 10.7 1.7 16.1 16.4 2.3 5.1

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

Please refer to important disclosures at the end of this report

MOIL | 3QFY2012 Result Update

Exhibit 1: 3QFY2012 performance

Y/E March (` cr) Net sales Raw material % of net sales Staff cost % of net sales Royalty and cess % of net sales Other expenditure % of net sales Total expenditure % of net sales Operating profit OPM (%) Other operating income EBITDA EBITDA margins (%) Interest Depreciation Other income Exceptional items Profit before tax % of net sales Tax % of PBT Profit after tax
Source: Company, Angel Research

3QFY12 240 16 6.8 57 23.7 9 3.7 48 20.1 130 54.3 109 45.7 109 45.7 7 50 152 63.4 50 33.2 102

3QFY11 253 (21) (8.1) 55 21.8 10 4.0 48 18.8 92 36.5 161 63.5 161 63.5 7 34 187 73.9 62 33.2 125

% yoy (5.4) 2.6 (13.3) 1.3 40.8 (31.9)

2QFY12 248 34 13.7 61 24.7 9 3.6 33 13.3 137 55.3 111 44.7 -

% qoq (3.5) (51.7) (7.4) (2.3) 45.9 (5.2) (1.5) (1.5) 1.3 5.3 0.5 0.5 0.5

(31.9) 0.0 47.8 (18.8) (14.2) (18.8) (18.9)

111 44.7 7 47 151 60.9 50 33.2 101

Exhibit 2: 3QFY2012 Actual vs. Angel estimates

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

Actual 240 109 45.7 102

Estimates 248 117 47.0 106

Variation (%) (3.4) (6.1) (130)bp (4.2)

February 7, 2012

MOIL | 3QFY2012 Result Update

Result highlights
Lower realization leads to slump in net sales
During the quarter, MOILs net sales decreased by 5.4% yoy to `240cr (slightly below our estimate of `248cr) mainly on account of the decline in average realization (down 20.1% yoy and 1.9% qoq to `7,993/tonne), partially offset by increased sales volume growth (up 19.5% yoy and 5.4% qoq to 285,500 tonnes).

Exhibit 3: Average realization declines by 20.1% yoy

300,000 250,000 200,000
(tonnes)

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 Sales volumes Realization - RHS
(`/tonne) (%)

150,000 100,000 50,000 0

Source: Company, Angel Research

EBITDA margin slips by 1,782bp yoy due to lower realization

EBITDA decreased by 31.9% yoy to `109cr. EBITDA margin dipped by 1,782bp yoy to 45.7% on account of slump in manganese ore prices. Other income, however, increased by 47.8% yoy to `50cr. Consequently, net profit decreased by 18.9% yoy to `102cr, slightly below our estimate of `106cr.

Exhibit 4: EBITDA declines by 31.9% yoy to `109cr

300 250 200
(` cr)

80.0 70.0 60.0 50.0 40.0 30.0 20.0

150 100 50 0 1QFY11 2QFY11 3QFY11 EBITDA 4QFY11 1QFY12 2QFY12 3QFY12 EBITDA margin - RHS

10.0 0.0

Source: Company, Angel Research

February 7, 2012

MOIL | 3QFY2012 Result Update

Investment rationale
Production capacity to expand, albeit gradually
MOIL has started expanding its existing mines to augment its production capacity to 1.5mn tonnes by CY2015 from 1.0mn tonnes in FY2011.

Adding value-added capacity through JVs

Currently, MOIL has beneficiation plants of 0.4mn tonnes at Dongri Buzurg mine and of 0.5mn tonnes 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 tonnes and that in case of RINL is 57,500 tonnes. The plants are expected to be commissioned in 2013.

Steep decline in manganese ore prices

Manganese ore prices have slumped by over 40% since January 2011 on account of oversupply in global markets. Going forward, we expect manganese ore prices to remain under pressure until there is sharp de-stocking. Thus, we expect MOILs EBITDA margin to contract during FY2013.

February 7, 2012

MOIL | 3QFY2012 Result Update

Outlook and valuation

Manganese ore prices have gradually slumped by over 40.0% since January 2011 on the back of oversupply in global markets. For 4QFY2012, MOIL has further lowered its prices by 5-20% for various grades. MOIL is expanding its production capacity at existing mines to 1.5mn tonnes by CY2015 from 1.0mn tonnes in FY2011. However, given the recent slump in manganese ore prices, we expect margins to remain under pressure during FY2013. Valuing the stock at 4.5x FY2013E EV/EBITDA, we derive a target price of `247 and recommend Reduce on the stock. We have lowered our realization estimates for FY2012 and FY2013 to factor in the further decline in manganese ore prices. Thus, our sales and profitability estimates stand reduced.

Exhibit 4: Revision of estimates

(` cr) Net sales EBITDA EBITDA margin (%) PBT Net income Net margin (%)
Source: Bloomberg, Angel Research

Earlier estimates FY12E FY13E 939 986 512 54.5 665 444 47.3 546 55.3 723 483 49.0

Revised estimates FY12E FY13E 972 979 449 46.2 611 408 42.0 447 45.7 617 412 42.1

Upgrade/(downgrade) (%) FY12E FY13E 3.5 (0.6) (12.2) (829)bp (8.1) (8.1) (533)bp (18.0) (967)bp (14.6) (14.6) (690)bp

Exhibit 5: EPS Angel forecast vs. consensus

Year (`) FY2012E FY2013E
Source: Company, Angel Research

Angel forecast 24.3 24.6

Bloomberg consensus 24.9 27.4

Variation (%) (2.4) (10.4)

Exhibit 6: Recommendation summary

Companies CMP (`) Target price (`) Reco. Mcap (` cr) Upside P/E (x) P/BV (x) EV/EBITDA (x) 2.5 2.1 RoE (%) 22.3 22.5 RoCE (%) FY13E 13.3 21.2 (%) FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E

Sesa Goa
NMDC Coal India MOIL

222 187 325 264

- Neutral 227 247 Buy Reduce

19,259 74,041 4,434

21 (6)

6.2 9.9 13.9 10.9

5.0 8.8 13.2 10.7

1.2 3.0 4.6 1.8

1.0 2.4 3.6 1.7

5.6 8.9 5.3

4.5 8.1 5.1

33.9 37.8 17.9

29.8 30.5 16.1

41.4 35.2 18.5

36.2 28.0 16.4

- Neutral 205,503

Source: Company, Angel Research

February 7, 2012

MOIL | 3QFY2012 Result Update

Profit & loss statement

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 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 978 978 134.2 273 187 86 704 283.7 72.1 16 688 306.1 70.4 47 6.3 735 271.4 735 255 34.7 (18) 462 257.5 49.1 28.6 28.6 257.5 1,293 1,293 32.3 374 254 120 920 30.6 71.1 25 895 30.0 69.2 112 11.1 1,007 37.0 1,007 343 34.1 26 690 38.3 51.3 39.5 39.5 38.3 969 969 (25.0) 367 264 103 602 (34.5) 62.1 25 577 (35.6) 59.5 130 18.4 707 (29.8) 707 240 34.0 (1) 466 (29.7) 48.1 27.8 27.8 (29.7) 1,140 1,140 17.6 373 214 159 767 27.4 67.3 33 735 27.4 64.4 145 16.5 880 24.5 880 292 33.2 588 26.1 51.6 35.0 35.0 26.1 972 972 (14.8) 523 352 170 449 (41.4) 46.2 28 421 (42.7) 43.3 190 31.1 611 (30.6) 611 203 33.2 408 (30.6) 42.0 24.3 24.3 (30.6) 979 979 0.8 532 365 167 447 (0.4) 45.7 27 420 (0.3) 42.9 197 32.0 617 1.1 617 205 33.2 412 1.1 42.1 24.6 24.6 1.1

February 7, 2012

MOIL | 3QFY2012 Result Update

Balance sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Shareholders Funds Total Loans Deferred tax liabilities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Total Assets 302 114 189 9 838 609 25 204 232 606 803 342 136 206 15 1,445 1,232 41 172 327 1,118 1,339 357 160 197 22 1,742 1,487 63 192 272 1,471 1,690 396 190 206 29 2 2,204 1,880 159 165 311 1,893 2,130 553 219 335 2 2,415 2,062 175 178 324 2,092 2,429 753 246 507 2 2,503 2,130 193 180 324 2,179 2,688 28 758 786 17 803 28 1,293 1,321 19 1,339 168 1,509 1,677 13 1,690 168 1,960 2,128 2 2,130 168 2,259 2,427 2 2,429 168 2,519 2,687 2 2,688 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

February 7, 2012

MOIL | 3QFY2012 Result Update

Cash flow statement

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. FY2008 FY2009 FY2010 735 16 26 (88) 245 444 (88) 45 (43) (113) (113) 287 321 609 1,007 25 113 359 724 (49) 104 56 (156) (156) 624 609 1,232 707 25 (103) 238 264 (23) 124 101 (110) (110) 255 1,232 1,487 FY2011 FY2012E FY2013E 880 33 (29) 303 580 (49) (2) (51) (137) (137) 393 1,487 1,880 611 28 (16) 203 420 (128) (128) (109) (109) 182 1,880 2,062 617 27 (19) 205 421 (200) (200) (153) (153) 68 2,062 2,130

(61) (127.5)

February 7, 2012

MOIL | 3QFY2012 Result Update

Key ratios
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) 4.0 31 59 30 41 4.0 56 17 20 36 2.8 46 32 23 39 3.0 50 40 22 42 2.0 50 40 20 57 1.5 50 40 20 56 108.7 74.5 83.6 65.5 38.1 31.1 38.5 30.9 18.5 17.9 16.4 16.1 70.4 65.3 5.8 267.6 267.6 69.2 65.9 8.6 391.2 391.2 59.5 66.0 6.3 245.8 245.8 64.4 66.8 5.0 216.9 216.9 43.3 66.8 3.2 91.2 91.2 42.9 66.8 2.1 60.7 60.7 28.6 28.6 28.4 5.8 46.8 39.5 39.5 42.6 7.9 78.6 27.8 27.8 29.2 5.6 99.8 35.0 35.0 36.9 7.0 126.7 24.3 24.3 26.0 5.0 144.5 24.6 24.6 26.2 7.0 159.9 9.2 9.3 5.6 2.2 3.9 5.4 4.8 6.7 6.2 3.4 3.0 2.5 3.5 2.4 9.5 9.0 2.6 2.1 3.0 4.9 1.7 7.5 7.1 2.1 2.7 2.2 3.3 1.2 10.9 10.2 1.8 1.9 2.4 5.3 1.0 10.7 10.1 1.7 2.7 2.3 5.1 0.9 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

February 7, 2012

MOIL | 3QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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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%)

February 7, 2012

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