RESULTS REVIEW 3QFY17 15 FEB 2017

MOIL
BUY
INDUSTRY MINING Windfall quarter
CMP (as on 15 Feb 2017) Rs 356
MOIL delivered strong numbers in 3QFY17 of US$5.25/dmtu). MOIL trades at cheap valuations
Target Price Rs 445
(Revenue/EBITDA 4/9x YoY to Rs 3.55/1.37 bn (3.8/2.3x FY18/19 EV/EBITDA). Maintain BUY with a
Nifty 8,725
respectively). This was driven by both strong pricing TP of Rs 445 (4.5x FY19 EV/EBITDA).
Sensex 28,156
(Rs 9,365, 65.1% YoY, 62.7% QoQ) and volumes (348
KEY STOCK DATA kT, 155.9% YoY, 11.9% QoQ). Supplies from South Highlights of the quarter
Bloomberg MOIL IN Africa were restricted due to rail bottlenecks, while Inventory liquidation continued with MOIL selling
No. of Shares (mn) 133 traders in Chinese ports stocked up. This drove prices ~76kT lumps from inventory. It is still sitting on over
100kT of inventory, despite liquidating 192kT in
MCap (Rs bn) / ($ mn) 47/709 of Mn ore up 108% (3Q vs 2Q), leading to a windfall
9MFY17. Till last year MOIL used to produce ore as per
6m avg traded value (Rs mn) 188 for the company. MoU with the government. However, sales volumes
STOCK PERFORMANCE (%) did not keep pace in some quarters when global prices
Prices have since cooled off (spot Mn ore is down
52 Week high / low Rs 429 / 180 fell and MOIL, which revised pricing only quarterly,
35% QTD vs 3Q- refer chart on pg 3). Some of the failed to respond. This led to a huge inventory buildup
3M 6M 12M large mines which went offline during the price crash (287kT at FY16 end).
Absolute (%) 15.0 46.8 88.7 in late 2015 have also resumed operations (e.g.
Relative (%) 7.9 46.8 69.2 Bootu Creek in Australia). Given high port inventory,
Near-term outlook: Mn ore prices have corrected to
US$5.25/dmtu (from average of US$8.17 in 3FYQ17).
SHAREHOLDING PATTERN (%) this supply addition could drive prices down further. We expect further pricing cuts in March, given that
Promoters 75.58 Our numbers assume global prices at selling prices are currently higher than global prices at
FIs & Local MFs 9.56 US$4.0/4.5/dmtu in FY18/19 (vs current spot prices present, and this may weigh on volumes in 4QFY17.
FIIs 3.11 Financial Summary (Standalone)
(Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY15 FY16 FY17E FY18E FY19E
Public & Others 11.75
Net Sales 3,553 890 299.4 1,960 81.2 8,233 6,287 9,940 12,066 14,063
Source : BSE
EBITDA 1,371 153 797.0 24 5,519.3 4,159 995 3,126 5,555 7,232
Ankur Kulshrestha PAT 1,014 132 670.6 415 144.6 4,280 1,938 3,229 4,773 6,107
ankur.kulshrestha@hdfcsec.com Diluted EPS (Rs) 7.61 0.78 872.1 3.11 144.6 25.5 11.5 23.0 35.8 45.8
+91-22-6171 7346 P/E (x) 14.0 34.6 15.5 9.9 7.8
EV / EBITDA (x) 7.4 30.8 8.7 3.8 2.3
Sarfaraz Singh
sarfaraz.singh@hdfcsec.com RoE (%) 13.2 5.7 10.3 15.8 17.5
+91-22-6171 7331 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 MOIL : RESULTS REVIEW 3QFY17

Quarterly Financials Snapshot

(Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Revenue growth driven by
Net Sales 3,553 890 299.4 1,960 81.2
higher sales volumes, which in
turn was driven by liquidation Employee costs 759 706 769
(Increase)/Decrease in stock 332 (561) 506
of (mostly lumps) inventory.
Other Operating Expenses 1,059 563 88.0 590 79.5
Cost of materials consumed 32 29 71
EBITDA 1,371 153 797.0 24 5,519.3
Other Income/(expense) 399 607 (34.3) 559 (28.7)
Depreciation 133 136 128
Exceptional Items (62) (409) 156
PBT 1,574 215 632.3 611 157.6
Tax 560 83 196
APAT 1,014 132 670.6 415 144.6
E/o (adj for tax) 0 0 0
RPAT 1,014 132 670.6 415 144.6
Source: Company, HDFC sec Inst Research

Per Tonne Analysis

3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Strong pricing growth, driven Production (kT) 272 242 12.4 203 34.0
by high landed cost of imports Non-Fines 219 230 (4.8) 173 26.6
Fines 53 12 341.7 30 76.7
Sales volumes (kT) 348 136 155.9 311 11.9
Non-Fines 295 123 139.8 281 5.0
Fines 53 13 307.7 30 76.7
Realisation (Rs/T) 9,365 5,672 65.1 5,757 62.7
Non-Fines 10,448 6,019 73.6 6,158 69.7
Fines 3,334 2,387 39.6 2,003 66.4
EBITDA/t (Rs) 3,939 1,124 250.5 78 4,921.9
Source: Company, HDFC sec Inst Research

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 MOIL : RESULTS REVIEW 3QFY17

Key Assumptions
Assumption FY15 FY16 FY17E FY18E FY19E
Mn Ore Volumes (mn T) 0.91 0.97 1.15 1.20 1.25
Benchmark Mn Ore Prices 4.22 2.59 3.47 4.00 4.50
MOIL Realisations (Rs/t) 8,951 6,442 8,454 9,861 11,056
Blended EBITDA (Rs/t) 4,121 937 2,628 4,528 5,678
Source: Company, HDFC sec Inst Research

Mn ore prices
Mn ore, 44% CIF China, US$/dmtu Quarterly average MOIL Prices (US$/dmtu,44% , CIF Balaghat)
MOIL will need to cut prices 12.0 US$/dmtu
aggressively in March to
10.0
maintain volumes
8.0
6.0
4.0
2.0
-
Feb-13

Feb-14

Feb-15

Feb-16

Feb-17
Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Dec-16
Aug-13

Aug-14

Aug-15

Aug-16
Oct-12

Oct-13

Oct-14

Oct-15

Oct-16
Apr-13

Apr-14

Apr-15

Apr-16
Source: Metal Bulletin, Bloomberg, Steelmint, HDFC sec Inst Research

Strong volume growth, inventory drawdown aided Pricing gains as Mn ore prices surged globally
Non-fines Fines YoY (%) - RHS Rs/t Blended Non-fines Fines
5.00 100.0% 12,000
80.0% 10,000
4.00 60.0%
40.0% 8,000
3.00
20.0% 6,000

2.00
(20.0%) 4,000
1.00 (40.0%)
2,000
(60.0%)
0.00 (80.0%) 0

3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17

Source: Company, HDFC sec Inst Research Source: MB, Bloomberg, Company, HDFC sec Inst Research

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 MOIL : RESULTS REVIEW 3QFY17

Income Statement Balance Sheet

Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E As at March (Rs mn) FY15 FY16 FY17E FY18E FY19E
Net Revenues 8,233 6,287 9,940 12,066 14,063 SOURCES OF FUNDS
Growth % (19.4) (23.6) 58.1 21.4 16.6 Share Capital 1,680 1,680 1,332 1,332 1,332
Material Expenses 1,369 1,898 3,067 2,656 2,865 Reserves 32,137 32,854 26,971 30,960 36,283
Employee Expenses 2,628 3,012 3,360 3,444 3,530 Total Shareholders Funds 33,817 34,534 28,303 32,292 37,615
SG&A Expenses 369 373 391 411 431 Long Term Debt 0 0 0 0 0
Other operating expenses 76 90 81 89 98 Short Term Debt 0 0 0 0 0
Operating profits 3,790 914 3,041 5,466 7,139 Total Debt 0 0 0 0 0
Operating Profit Margin (%) 46.0 14.5 30.6 45.3 50.8 Deferred Taxes 110 105 105 105 105
Other operating income 368 81 85 89 94 Long Term Provisions & Others 103 96 96 96 96
EBITDA 4,159 995 3,126 5,555 7,232 TOTAL SOURCES OF FUNDS 34,030 34,734 28,503 32,493 37,816
EBITDA % 50.5 15.8 31.5 46.0 51.4 APPLICATION OF FUNDS
EBITDA Growth % (25.0) (76.1) 214.2 77.7 30.2 Net Block 2,939 3,109 3,874 4,542 5,112
Depreciation 451 525 535 632 730 CWIP 529 804 804 804 804
EBIT 3,708 470 2,591 4,923 6,502 Investments 42 2 2 2 2
Other Income (including EO LT Loans and Advances 798 667 667 667 667
2,798 2,232 2,021 1,896 2,221
items) Total Non-current Assets 4,308 4,582 5,347 6,014 6,584
Interest 0 0 0 0 0
Inventories 1,442 1,630 1,080 1,330 1,580
PBT 6,506 2,703 4,613 6,819 8,724
Debtors 1,072 1,420 1,442 1,169 896
Tax 2,226 973 1,384 2,046 2,617
Other Current Assets 1,358 1,147 1,147 1,147 1,147
RPAT 4,280 1,730 3,229 4,773 6,107
Cash & Equivalents 28,299 28,501 22,033 25,378 30,154
EO (Loss) / Profit (Net Of Tax) - (208) - - -
Total Current Assets 32,171 32,698 25,702 29,024 33,777
APAT 4,280 1,938 3,229 4,773 6,107
Creditors 35 34 34 34 34
APAT Growth (%) (16.0) (54.7) 66.6 47.8 27.9 Other Current Liabilities &
Adjusted EPS (Rs.) 25.5 11.5 23.0 35.8 45.8 2,415 2,512 2,512 2,512 2,512
Provns
EPS Growth (%) (16.0) (54.7) 99.3 55.9 27.9 Total Current Liabilities 2,450 2,546 2,546 2,546 2,546
Source: Company, HDFC sec Inst Research, Standalone numbers displayed Net Current Assets 29,722 30,153 23,156 26,478 31,231
TOTAL APPLICATION OF FUNDS 34,030 34,734 28,503 32,493 37,816
Source: Company, HDFC sec Inst Research

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 MOIL : RESULTS REVIEW 3QFY17

Cash Flow Key Ratios

Year ending March (Rs mn) FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 6,506 2,703 4,613 6,819 8,724 PROFITABILITY (%)
Non-operating & EO items (2,798) (2,441) (2,021) (1,896) (2,221) EBITDA Margin 50.5 15.8 31.5 46.0 51.4
Interest expenses 0 0 0 0 0 APAT Margin 52.0 30.8 32.5 39.6 43.4
Depreciation 451 525 535 632 730 RoE 13.2 5.7 10.3 15.8 17.5
Working Capital Change (1,884) (130) 528 23 23 Core RoCE 77.6 6.2 34.1 59.8 71.6
Tax paid (2,226) (973) (1,384) (2,046) (2,617) RoCE 14.0 5.4 10.3 15.8 17.5
OPERATING CASH FLOW ( a ) 49 (316) 2,270 3,532 4,638 EFFICIENCY
Capex (844) (526) (1,300) (1,300) (1,300) Tax Rate (%) 29.8 36.2 30.0 30.0 30.0
Free cash flow (FCF) (795) (843) 970 2,232 3,338 Asset Turnover (x) 1.3 0.8 1.2 1.4 1.5
Investments 0 40 0 0 0 Inventory (days) 43 89 50 36 38
Non-operating Income 2,798 2,441 2,021 1,896 2,221 Debtors (days) 49 72 53 40 27
INVESTING CASH FLOW ( b ) 1,954 1,954 721 596 921 Payables (days) 2 2 1 1 1
Debt Issuance/(Repaid) 0 0 0 0 0 Cash Conversion Cycle (days) 89 160 101 75 64
Interest expenses 0 0 0 0 0 Debt/EBITDA (x) N/M N/M N/M N/M N/M
FCFE 1,954 1,954 721 596 921 Net D/E N/M N/M N/M N/M N/M
Share Capital Issuance 0 0 (8,633) 0 0 Interest Coverage N/M N/M N/M N/M N/M
Dividend (1,714) (989) (826) (784) (784) PER SHARE DATA
FINANCING CASH FLOW ( c ) (1,714) (989) (9,460) (784) (784) EPS (Rs/sh) 25.5 11.5 23.0 35.8 45.8
NET CASH FLOW (a+b+c) 289 649 (6,468) 3,345 4,776 CEPS (Rs/sh) 28.2 13.4 26.8 40.6 51.3
EO Items/Others 81 (447) DPS (Rs/sh) 8.5 5.0 5.0 5.0 5.0
Closing Cash & Equivalents 28,299 28,501 22,033 25,378 30,154 BV (Rs/sh) 201.3 205.6 201.5 242.5 282.4
Source: Company, HDFC sec Inst Research VALUATION
P/E 14.0 34.6 15.5 9.9 7.8
P/BV 1.8 1.7 1.8 1.5 1.3
EV/EBITDA 7.4 30.8 8.7 3.8 2.3
OCF/EV (%) 0.3% (1.8%) 9.3% 16.7% 28.3%
FCF/EV (%) (4.4%) (4.7%) 4.0% 10.5% 20.3%
FCFE/Market Cap (%) 2.4% 2.3% 3.6% 6.0% 9.0%
Dividend Yield (%) 2.4 1.4 1.4 1.4 1.4
Source: Company, HDFC sec Inst Research, N/M Not Meaningful

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 MOIL : RESULTS REVIEW 3QFY17

RECOMMENDATION HISTORY
Date CMP Reco Target
MOIL TP
16-Feb-16 184 BUY 241
8-Apr-16 236 NEU 242
420
27-May-16 219 BUY 242
370 8-Jul-16 238 NEU 242
1-Sep-16 251 NEU 242
320 7-Oct-16 284 NEU 296
16-Nov-16 330 BUY 445
270
15-Feb-17 356 BUY 445
220
Rating Definitions
170
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Aug-16
Apr-16

Jan-17
Feb-16

Jul-16

Sep-16

Feb-17
Nov-16
Jun-16
May-16

Dec-16
Mar-16

Oct-16

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 MOIL : RESULTS REVIEW 3QFY17

Disclosure:
We, Ankur Kulshrestha, PGDBM and Sarfaraz Singh, PGDM authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
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view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No

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HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board : +91-22-6171 7330 www.hdfcsec.com

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