Manganese Ore India Ltd (MOIL) IPO – Subscribe says Sharekhan and Ventura

MOIL Limited (MOIL), a Miniratna public sector unit, incorporated in 1896, is India’s largest producer of manganese ore by volume.
Issue Details
Listing NSE & BSE
Offer Open date 26th Nov 2010
Offer Close date 30th Nov 2010
Promoter GoI
Price Band 340-375
IValuation & Recommendation
MOIL is valued at its P/BV of 3.4x and 3.7x at the lower & upper price band respectively. The company’s RoNW stands at a comfortable 27.8% and a competitive P/E of 12.3x and 13.5x at its lower & upper price band, respectively, which gives a strong signal of growth. With the company having attractive valuation, a
sustainable business model, a large resource base and traction in demand, Ventura recommend a SUBSCRIBE on the company for listing gains as well as for a medium to long term horizon.

Sharekhan said that according to the Indian steel ministry, India is expected to become the second largest producer of crude steel in the world by 2015-16. This augurs well for the manganese ore demand. MOIL being the largest producer of manganese ore in India is well positioned to tap this increasing demand.
Also, the company has a strong balance sheet and return ratios along with a stable dividend policy (the company pays about 20% of its earnings). At the issue price band of Rs340-375, the stock is offered at 12.2x and 13.5x FY2010 earnings. On enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (EBITDA) terms, the stock is offered at 7x and 8x its FY2010 EBITDA. The EV/ EBITDA multiple comes down further to 4.9x and 5.7x on TTM EBITDA basis. Moreover, adjusting cash per share of
Rs104, the valuation looks more reasonable. Sharekhan believe that on the back of the strong financials and being the largest player, MOIL is a good long term bet.

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