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MAKING MA RK
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Detailed report
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Assessment
Excellent fundamentals Superior fundamentals Good fundamentals Moderate fundamentals Poor fundamentals
Assessment
Strong upside (>25% from CMP) Upside (10-25% from CMP) Align (+-10% from CMP) Downside (negative 10-25% from CMP) Strong downside (<-25% from CMP)
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Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company.
Disclaimer:
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Rs 660 Rs 470
Fundamental Grade
Monnet Ispat & Energy Ltd (Monnet) is expanding capacity to fuel the next level of growth and become an integrated steel company with total steel capacity of 1.8 mn MTPA. The operational captive coal mine along with other allocated iron ore and coking coal mines, once operational, will partially meet its raw material requirement and give it a cost advantage. Further, diversification into power generation with a 1,050 MW power plant in Orissa is expected to be value accretive given captive fuel linkages. However, regulatory approvals and delays remain key monitorables. We reaffirm a fundamental grade of 4/5 on Monnet, indicating that its fundamentals are superior relative to other listed securities in India. Transitioning into a mid-sized integrated steel player Monnet is transitioning from the second largest coal-based sponge iron producer to a midsized integrated steel company with a capacity of 1.8 mn MTPA by end-FY14. The expansion will help raise the share of value-added products (structural steel, longs (bars) and flats (plates)) in the revenue to 63% in FY13 and 79% in FY14 from 8% in FY11. The mining linkage for iron ore, coal and coking coal will partially meet its requirement and give it a cost advantage. Power plant to fuel growth Work on subsidiary Monnet Powers 1,050 MW power plant is progressing and is expected to be commissioned in FY14. The upcoming pit head plant has 100% coal linkage through its two captive blocks, making it very cost efficient and highly profitable. Utkal mine, the first block, has secured all approvals and is set to start operations once the mining lease is signed. The Mandani block is yet to secure regulatory approvals. Operates in a cyclical industry, faces regulatory delays Monnet operates in a highly cyclical industry - steel - where the profitability of the players is dependent on global steel prices. Further, the company faces the risk of delay in approvals for its mines (except Utkal mine), which can hamper its profitability and expansion plans. Standalone revenues to grow at a three-year CAGR of 35% We expect Monnets standalone revenues to grow to Rs 39 bn by FY14 from Rs 15.7 bn in FY11, largely driven by capacity expansion. EBITDA margin is expected to drop to 25% in FY13 from 29% in FY11 on account of lower margins from pig iron; however, it is expected to improve in FY14 to 28% with the commissioning of the pellet plant and iron ore mine. Margins are expected to improve in the long run as the captive coking coal block also becomes operational. Valuations the current market price has strong upside CRISIL Research has used the sum-of-the-parts (SOTP) method to value Monnet and arrived at a fair value of Rs 660 per share. Our valuation grade is 5/5, which indicates the market price has a strong upside from the current.
5 4 3 2 1
Poor Fundamentals
Valuation Grade
Strong Downside Strong Upside
SHAREHOLDING PATTERN
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 49.4% 49.4% 49.4% 49.4% 13.6% 4.5% 32.5% 14.1% 4.4% 32.1% 10.9% 4.4% 35.3% 11.5% 4.3% 34.8%
Monnet NIFTY
ANALYTICAL CONTACT
Chetan Majithia (Head) Vishal Rampuria Pravesh Rawat Client servicing desk +91 22 3342 3561 clientservicing@crisil.com chetan.majithia@crisil.com vishal.rampuria@crisil.com pravesh.rawat@crisil.com
EV/EBITDA (x) 8.3 11.1 NM: Not meaningful; CMP: Current market price Source: Company, CRISIL Research estimates
CRISIL IERIndependentEquityResearch
Table 1: Monnet Business environment (Standalone)
Product / Segment Revenue contribution (FY11) Sponge iron 68.7% Steel and others 11.3% Power 20.0%
12% / 11% / 6%
Various sizes of structural sections covering a wide range of structural grades, ferro alloys
Geographic presence
Manufacturing facility: Raipur, Chhattisgarh Manufacturing facility: Raipur and Raigarh, Chhattisgarh Manufacturing facility in Raigarh under construction
Market position Industry growth expectations Sales growth (FY08-FY11 3-yr CAGR) Sales forecast (FY11-FY14 3-yr CAGR)
Second largest coal-based sponge iron producer in India 33% Domestic steel demand is expected to increase at a healthier pace of 7-9% over the next couple of years International steel demand is expected to grow at a CAGR of 5-6% -38% 184%
160%
Strong growth in infrastructure, construction and automobiles sectors The government's increased focus on infrastructure development
JSPL, JSW Steel, Tata Steel, SAIL, Jai Balaji Steel, MSP Steel, Bhushan Steel and others Dependence on the open market for procuring iron ore and coking coal exposes Monnet to fluctuations in raw material prices Sale of residual power after captive use in the merchant market exposes Monnet to the risk of decrease in merchant rates in the future Monnet is yet to commence mining extraction. Any delay in that will negatively impact the companys profitability
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Grading Rationale
Second largest sponge iron producer in India...
Monnet, the second largest producer of coal-based sponge iron in India, also produces steel, structural steel and power. It has sponge iron capacity of 0.8 mn MTPA (million tonnes per annum), steel capacity of 0.3 mn MTPA, structural steel (long steel) capacity of 0.2mn MTPA and power capacity of 150 MW.
Second largest sponge iron player with nearly the highest utilisation rate in the industry
Transitioning from a sponge iron player to an integrated 1.8 mn MTPA steel player
CRISIL IERIndependentEquityResearch
Monnet is expected to incur capital expenditure of ~Rs 36 bn over FY11-14 to complete the expansion. It will be funded though a mix of debt and internal accrual; the company has already tied up for its debt requirements. We expect the major part of the expansion to come on stream in FY13. The company has spent close to ~Rs 26 bn as of H1FY12.
0.61mn mtpa
0.61mn mtpa
0.85mn mtpa
0.30mn mtpa
0.20mn mtpa
0.86mn mtpa
Power
1.80mn mtpa
230MW Power
230MW Power
Mettalics
Mettalics
Forward integration to add more value-added products: Monnet is moving up the value
chain with the installation of 1.5 mn MTPA of value-added steel capacity (steel plate - 0.75 mn MTPA and steel bars 0.85 mn MTPA). The increasing contribution of higher value-added products will increase the blended realisation at 25% CAGR over FY11 to FY14.
60% 50% 40% 30% 20% 10% 0% FY10 15.7% 12.8% FY12E Steel Bar 13.0% FY13E 19.9%
20,000 30.4%
7.6% FY11
7.0% FY14E
Structural Steel
Steel plate
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Blast furnace to provide a hedge: The company is planning to use the blast furnace to
produce steel in addition to the currently operational sponge iron route. The primary difference in the two methods is the types of raw materials used - scrap and power are used in the sponge iron route and coke in the blast furnace route. The availability of both capacities will provide a hedge against direct and indirect impact of higher cost of manufacturing from any single route. For instance, a player with only sponge iron capacity is exposed to the dip in steel prices on account of a drop in coke prices a key raw material for the blast furnace. Reduction in coke prices will reduce the cost of producing steel from the blast furnace route and a lower cost will pull the price down. In this case, sponge iron players are left with the only option of selling steel at reduced prices, thus putting pressure on their profitability as their cost of steel manufacturing is unchanged. Also the company will enter into flat products using steel manufactured through the blast furnace route. The captive mine meets ~72-75% of coal requirement for the sponge iron plant.
Availability of both capacities will provide a hedge against higher cost of manufacturing from any single route
CRISIL IERIndependentEquityResearch
tonne of steel production in FY12 with the help of its captive coal mine, which will support FY12 EBITDA margin by ~1080 bps.
Source: Company, CRISIL Research Power production using waste heat: The company, in-line with the industry practice, uses waste heat produced during the production of sponge iron to generate power. It produces ~30% of total power through the waste heat, which is extremely cost competitive. Monnet has an installed capacity of 150 MW and is in the process of increasing it to 230 MW by end-FY12. The company has further commissioned 12 MW under its 97% owned subsidiary, Rameshwaram Steel & Power Pvt Ltd, which sells power in the open market. The total power generation is more than the requirement in steel production which allows the company to sell surplus power in the open market. The cost of processing waste heat for use in the turbines is close to Rs 0.4-Rs 0.5 per KWh of power produced while it is sold for Rs 3.5 per KWh of power. However, the cost of power produced from coal (market purchase) is ~Rs3.2-Rs 3.5 per unit. We expect power sales to contribute 12%, 11% and 6% to the total sales in FY12, FY13 and FY14 respectively. The decrease in power contribution is on account of increased contribution from value-added steel products bars and plates. Considering huge power capacity additions in India in the near future with increasing fuel cost, CRISIL Research expects merchant rate to hover around Rs 3.7-3.9 per KWh in FY14.
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to 2.2 mn MTPA of iron ore. The mine will have capacity of 0.8 mn MTPA, which if operational at 90% will produce .72 mn MTPA - 33% of the total expected requirement. Pellet and sinter plants: Monnet is setting up a 1.2 mn MTPA pellet plant and a 0.9 mn MTPA sinter plant by the end of FY13. We believe this will help the company reduce its exposure to iron ore purchases and further add to the profitability as it would reduce per tonne cost of iron ore by 15-20%. The pellet plant, running at 65% capacity utilisation, can meet ~34% of the total expected iron ore requirement post expansion. However, even after the commissioning of these plants, Monnet will have to purchase iron ore fines from the market exposing it to the price fluctuations of iron ore fines. Coking coal mine: With installation of the blast furnace, for the initial years Monnet will have to purchase coking coal from the market. But this exposure is covered in the long term as it has been allocated a coking coal mine in Madhya Pradesh with total reserves of 69.8 MT and Monnets share is 23.3 MT (approximate cost ~ Rs 5,000-6,000 per tonne).
FY11 50% 0% NA
FY12E 50% 0% NA
FY13E 46% 0% 0%
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Demand for steel in India has been hit by persistent inflation, higher interest rates and their effect on end-user demand. With rising cost of finance and execution delays owing to environment clearances, many construction and infrastructure projects are not taking off as expected, translating to lower demand for steel as of now.
CRISIL IERIndependentEquityResearch
Prices to cool off due to rising supply
With higher capacity additions expected during FY12 to FY16, the demand-to-capacity ratio is expected to moderate. The crude steel capacity addition of 55-60 mn MTPA tonnes has been announced for the next five years. Considering the ongoing concerns such as land acquisition and delays in environmental and forest clearance, CRISIL Research expects domestic steel manufacturers to add only 40-45 mn MTPA capacity over FY12 to FY16. Most of these planned capacities are expected to be commissioned during FY14 to FY16. Incremental demand is expected to be 28-32 mn MTPA - relatively lower than the incremental supply, which will widen the demand-supply gap and put a downward pressure on steel prices.
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100% raw material linkages make Orissa Sponge a low cost steel producer
Blackstone has bought 12.5% stake for Rs 2.75 bn, valuing the company at Rs 22 bn
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Project execution on track
The project has received all statutory approvals and clearances. It is being executed in two units of 525 MW each. The management expects the first phase to go on line by July 2013 and the second phase by the end of September 2013. The company has given the order for BTG equipment to BHEL and the balance of plant (BOP) order has been given to Indure Pvt Ltd. During our site visit on February 17, 2012, we found that boiler foundation for the first phase has been completed and boiler drum has arrived at the site. The boiler lifting for the first unit is expected to be completed by February-end. The company is also planning to start work in two shifts to hasten the pace of construction. We expect delay in the commissioning by twothree months considering it is the first independent power producer project by the group and its size.
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Mandakini coal mine: Monnet has been allocated Mandakini mine in collaboration with Tata Power and Jindal Photo. The company is in advance stage of getting Forest-I approval. The mine is at a distance of ~20 km from the plant and coal will be transferred through a conveyor belt. The management expects the mine to be operational in end-FY14. In case the other partners are unable to use the allocated coal for captive consumption, Monnet is entitled to use their share for its captive consumption. Jindal Photo is setting up a 1,800 MW power plant (to be commissioned in FY13) through its step-down subsidiary Jindal India Thermal Power Ltd (JITPL) in Angul, Orissa. Tata Power has not started any work on the power plant and therefore, would let the other two companies to use the TATAs share in the medium term.
The company will get a blended rate of ~Rs 2.9 per KWh
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Peer comparison
EBITDA margin
In % Monnet JSPL MSP Steel Bhushan Steel Godawari Power TATA Sponge Jai Balaji FY07 27.69 35.08 21.39 20.97 16.93 10.19 13.36 FY08 21.90 34.37 19.05 24.98 16.85 9.91 18.86 FY09 24.56 30.76 15.91 29.74 10.64 4.89 9.63 FY10 30.26 33.19 17.70 37.6 15.02 6.15 12.22 FY11 28.79 36.4 21.02 39.24 18.52 6.89 14.5
PAT margin
In % Monnet JSPL MSP Steel Bhushan Steel Godawari Power TATA Sponge Jai Balaji FY07 21.17 17.66 9.03 7.3 10.19 6.34 5.41 FY08 14.33 19.77 12.86 8.92 9.91 17.61 7.61 FY09 13.13 17.71 9.40 7.76 4.89 17.32 0.07 FY10 18.15 18.16 8.10 13.8 6.15 14.58 1.54 FY11 17.90 19.14 9.89 13.14 6.89 13.43 3.15
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D/E
FY07 Monnet JSPL MSP Steel Bhushan Steel Godawari Power TATA Sponge Jai Balaji 1.76 1.41 1.40 2.67 1.35 0.93 2.74 FY08 1.01 1.03 1.57 3.52 0.75 0.35 4.23 FY09 1.10 0.92 1.61 3.31 0.77 0 5.23 FY10 0.90 1.24 2.06 2.86 0.82 0 1.76 FY11 1.28 1.39 2.20 2.81 1.15 0 1.9
Interest Coverage
FY07 Monnet JSPL MSP Steel Bhushan Steel Godawari Power TATA Sponge Jai Balaji 5.35 6.93 3.11 2.35 4.5 5.13 3.88 FY08 4.92 7.73 4.37 2.31 4.65 11.97 2.00 FY09 5.87 9.53 2.62 1.69 2.95 na 1.04 FY10 5.00 7.69 2.80 2.23 2.96 na 1.33 FY11 8.45 6.67 3.53 2.02 2.66 na 1.78
RoE
In % Monnet JSPL MSP Steel Bhushan Steel Godawari Power TATA Sponge Jai Balaji FY07 27.48 32.39 27.85 29.78 34.51 13.9 40.03 FY08 20.12 39.56 32.35 29.84 32.24 47.55 39.73 FY09 18.82 33.5 17.99 20.75 14.04 40.69 0.36 FY10 18.96 24.33 15.97 26.32 11.26 21.96 5.06 FY11 15.05 26.75 21.24 20.33 13.72 21.86 7.88
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Key risks
Exposed to fluctuation in iron ore and coke prices
Monnet procures iron ore from the open market, which exposes it to fluctuation in iron ore prices. Post installation of the blast furnace (0.61 mn MTPA) and expansion of the sponge iron plant (to 1.02 mn MTPA), Monnet will require close to 2.2 mn MTPA of iron ore and 0.32 mn MTPA of coke in FY14. The market purchase of these ores will constitute 60% of the total raw material cost in FY14. Increase in prices of these raw materials will severely affect the profitability of the company. A 10% increase in the prices of iron ore and coke will lead to ~280 bps contraction in the PAT margin. Further, the management has indicated that the company will focus on acquiring the raw material first before planning future capex.
Regulatory risk
The company has been allocated coal, iron ore and coke blocks but it is yet to receive the necessary approvals for most of them. Any delay in the clearance process of mining leases will negatively impact the companys future margins. Also, the draft mining bill mandates sharing of 26% of the profit from mining for development of the locals. In case the bill gets approved, it will adversely impact profitability of all the mining players including Monnet. Recently, the prime ministers office (PMO) directed Coal India to sign fuel supply agreements with power plants that have been commissioned up to December 31, 2011. As per the decision, Coal India will be penalised if the supply of coal is below 80%. This may reduce the steel industrys share in Coal Indias total coal output, which will hamper the profitability of the industry.
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Financial Outlook
Revenues to grow at three-year CAGR of 35%
Standalone revenues are expected to increase at a three-year CAGR of 35% to Rs 39 bn by FY14. The growth will be fuelled by capacity expansion and higher per unit realisation on account of increasing share of high value-added products. The company will start manufacturing steel through the pig iron route and commence the production of value-added products such as bars and plates.
Revenues likely to grow at a threeyear CAGR of 35% driven by capacity expansion and higher realisations
1,130,208
400,000
682,847
678,023
715,222
0%
200,000 0
837,966
10%
10,000 5,000 0
FY10
FY11
FY12E
FY13E
FY14E
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Figure 15: Margin expected to decline and then improve
(Rs mn) 12,000 10,000 8,000 6,000 15% 4,000 2,000 3,818 0 FY09 FY10 EBITDA FY11 FY12E FY13E FY14E 4,487 4,522 5,019 7,311 10,800 0% 10% 5% 30% 25% 35% 29% 27% 25% 25% 20% 28% 30%
Adjusted PAT
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Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management quality, apart from other key factors such as industry and business prospects, and financial performance.
Experienced management
Monnet has an experienced management headed by Mr Sandeep Jajodia, executive vice chairman and managing director. He has over 18 years of experience in diversified industries including steel, sugar and power. Under his management, Monnets sales grew at a five-year CAGR of 25% from Rs 5.3 bn in FY06 to Rs 15.7 bn in FY11.
An experienced management
Mr K. K. Khanna, executive director projects: Mr Khanna has 40 years of experience and has held senior positions with Ispat Industries and SAIL Mr M. D. Mundra president projects: Mr Mundra has 33 years of experience in the power industry Mr K. L. Khurana, president power: Mr Khurana has 45 years of experience in the power industry and was previously with BHEL as executive director. Mr M. K. Sinha: Mr Sinha has 42 years of experience in the mining sector and was previously working as director (tech) with Coal India Mr Vinay Mittal, CEO Monnet Power Company Ltd: Monnet has recently Inducted Mr Mittal, as chief executive officer in the MPCL. He has worked with NTPC and TATA Power. He has vast experience of leading power projects in India. He was instrumental in the TATA Powers 4000 MW UMPP in Mundra.
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CRISIL IERIndependentEquityResearch
Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of corporate governance and management quality, apart from other key factors such as industry and business prospects, and financial performance. In this context, CRISIL Research analyses the shareholding structure, board composition, typical board processes, disclosure standards and related-party transactions. Any qualifications by regulators or auditors also serve as useful inputs while assessing a companys corporate governance. Overall, corporate governance at Monnet meets the regulatory requirement it has reasonably good board practices and an independent board.
Board composition
The board consists of eight members, of whom six are independent directors, thereby meeting the requirements under Clause 49 of SEBIs listing guidelines. The board is chaired by an independent director, Mr Mohinder Gujral, who has 62 years of experience and was previously chairman of Railway Board and chairman of Coal India Ltd. The directors have a strong industry experience and are highly qualified. Given the background of directors, we believe the board is experienced. The independent directors on the board include:
Mr G C Mrig, who is experienced in cool mining and related activities and has retired as CMD of Bharat Coking Cool Ltd. He owns a coal washery. Mr. Gopal Tiwari, who is an Ex-Chairman of Chhattisgarh State Electricity Board, who has replaced Mr P L Nene on the board. He has also been inducted as an independent member of the Audit Committee.
Mr J P Lath, who has expertise in liasioning with the government departments for procuring registrations, licences and entering into MoUs with state governments. Mr C.P. Baid, who is former CEO of Sterlite Energy and former director of Sesa Goa. He was appointed as deputy managing director in 2010.
Boards processes
The companys quality of disclosure can be considered good judged by the level of information and details furnished in the annual report, websites and other publicly available data. The company has all the necessary committees audit, remuneration, nomination and investor grievance - in place to support corporate governance practices. The audit committee is chaired by an independent director, Mr Mohinder Gujral.
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Valuation
Grade: 5/5
We roll forward our model to FY14 and increase our fair value to Rs 660 per share
We have used the sum-of-the-parts (SOTP) method to value Monnet. The steel business is valued by the EV/EBITDA method, power business using discounted cash flow method and investments (Orissa Sponge, Indonesia coal mine and Rameshwaram steel) on the book value. We have rolled forward our model to FY14. The steel business has been valued at Rs 298 per share, power business at Rs 315 per share and investment in subsidiaries at Rs 47 per share. Consequently our fair value is Rs 660 per share and valuation grade is 5/5.
Steel business:
Power business: In our initiating report, we estimated the power project to commence at
end-FY13, but the management has indicated a delay. We expect it to come on stream in H2FY14 and have factored in the delay in our valuation. We have valued Monnets 87.5% interest in the power subsidiary by the DCF method. Based on this method, we arrive at a total valuation of Rs 23.2 bn valuing Monnets 87.5% stake at Rs 20.3 bn. We have used cost of equity of 21% considering a project execution risk as it is Monnets first power project and ambiguity on the usage of coal from the mines between steel and power. This translates to a value of Rs 315 per share for Monnet.
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One-year forward P/E band
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Peer comparison
Rs mn Monnet Ispat & Energy Ltd MSP Steel & Power Ltd Steel Authority Of India Bhushan Steel Ltd Jindal Steel & Power Ltd Jai Balaji JSW Steel Ltd Source: CRISIL Research Last price 470 31 95 397 504 42 752 Mkt Cap 30,240 1,789 392,400 84,243 471,110 2,698 167,751 EBITDA margin FY11 FY12E FY13E 28.8 21.0 17.8 29.2 49.4 16.2 20.3 27.2 16.7 13.2 29.6 41.3 4.8 16.7 24.5 19.0 16.1 29.5 40.7 13.6 18.1 RoE FY11 FY12E FY13E 15.1 21.2 14.1 20.6 30.6 8.0 13.5 13.3 11.2 9.4 15.2 24.5 (17.1) 7.1 12.2 24.6 10.1 13.8 22.3 2.9 10.1 P/B FY11 FY12E FY13E 1.4 0.7 1.9 1.2 2.6 1.3 1.3 1.3 0.7 1.0 1.2 2.6 0.3 1.0 1.2 0.5 0.9 1.1 2.1 0.3 0.9 EV/EBITDA FY11 FY12E FY13E 11.1 8.2 8.4 12.4 10.6 12.1 13.3 11.8 8.1 6.9 8.9 9.0 18.2 6.3 9.0 3.9 5.1 8.2 7.8 6.0 5.2
* For detailed initiating coverage report please visit: www.ier.co.in CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.
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Company Overview
Incorporated in 1990, Delhi-based Monnet produces coal-based sponge iron and steel, and also generates power. Monnet is the second largest coal-based sponge iron producer in India after JSPL. It is listed on the NSE, BSE and Madhya Pradesh Stock Exchange.
Key milestones
Year 1990 1994 1996 2003 2005 2006 2007 2008 Milestones Incorporated as Monnet Ispat Ltd Commenced first manufacturing facility in Raipur (Chhattisgarh), with a capacity of 0.10 mn MTPA of sponge iron and 0.05 mn MTPA of mild steel Allotment of first coal mine in Milupara, Raigarh Consolidated the capacity of sponge iron and steel to 0.30 mn MTPA at the Raipur plant Increased the capacity of ferro alloys to 0.06 mn MTPA from 0.04 mn MTPA at the Raipur plant Changed its name to Monnet Ispat and Energy and set up another plant in Raigarh with 0.17 mn MTPA sponge iron capacity Installed 0.20 mn MTPA structured steel capacity. Increased the power generation capacity to 60 MW from 45 MW at the Raipur plant and sponge iron capacity to 0.39 mn MTPA at the Raigarh plant Set up a 90 MW power generation facility and increased sponge iron capacity to 0.50 mn MTPA at the Raigarh plant Source: Company, CRISIL Research
Source: Company, CRISIL Research Monnet owns the largest underground coal mine in the country in Raigarh (Chhattisgarh). It has total high grade coal (B to D) reserves of 86 mn MTPA, which is currently operational with an annual extraction of 1.0 mn MTPA--repeat.
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Rotary kiln
Sponge Irone
EAF Sale
Billets
Structured Steel
Sale
Sale
Product portfolio
Monnets current product portfolio includes coal-based sponge iron, steel, ferro alloys and power.
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CRISIL IERIndependentEquityResearch
Monnets subsidiary details
Monnet has six subsidiary companies - four are incorporated in India and two (Monnet Overseas Ltd and Monnet Global Ltd) are incorporated in Jabel Ali Free Trade Zone Dubai, UAE.
Details of subsidiaries
Subsidiary Monnet Overseas Ltd Monnet Global Ltd Monnet Power Company Ltd Monnet Daniels Coal Washeries Pvt Ltd Ownership interest 100.00% 100.00% 87.50% 51.64% Operational activity Deals in overseas investments MGL is promoted to hold the overseas mining assets to provide raw materials to Monnet and MPCL. It has acquired a 80 mn MTPA coal mine in Indonesia MPCL is primarily into power generation and distribution. It is setting up a 1,050 MW power plant in Angul, Orissa The company has 3.5 mn MTPA capacity of coal washery near Ranchi in Jharkhand. Along with Punjab State Electricity Board, it is setting up a 4.2 mn MTPA coal washery in North Karanpura in Jharkhand Monnet Cement Ltd Rameshwaram Steel & Power Pvt Ltd Source: Company, CRISIL Research 99.95% 97.00% A cement producer aiming to set up a cement plant in Raipur with a capacity of 3 mn MTPA The company has sponge iron manufacturing. Acquisition of Rameshwaram has added 30 mn MTPA captive iron ore mine to the existing capacities
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Balance Sheet
(Rs m n) Liabilities Equity share capital Reserves Minorities Net w orth Convertible debt Other debt Total debt Deferred tax liability (net) Total liabilities Assets Net fixed assets Capital WIP Total fixed assets Investments Current assets Inventory Sundry debtors Loans and advances Cash & bank balance Marketable securities Total current assets Total current liabilities Net current assets Intangibles/Misc. expenditure Total assets FY10 523 16,024 16,546 525 14,425 14,950 1,196 32,692 11,283 7,212 18,495 5,130 2,188 1,289 5,351 2,052 324 11,204 2,137 9,067 32,692 FY11 644 20,258 20,901 392 26,327 26,719 1,412 49,032 10,937 15,127 26,064 5,432 3,604 1,898 7,831 6,881 68 20,282 2,746 17,536 49,032 FY12E 644 22,838 23,482 33,219 33,219 1,488 58,189 32,036 5,127 37,164 5,432 4,302 2,024 8,158 4,115 68 18,668 3,074 15,593 58,189 FY13E 644 25,481 26,125 40,219 40,219 1,490 67,833 36,373 5,127 41,500 6,432 6,938 3,265 9,498 4,777 68 24,547 4,646 19,901 67,833 FY14E 644 29,310 29,954 43,219 43,219 1,634 74,806 40,384 5,127 45,512 7,432 9,096 4,280 11,351 2,874 68 27,669 5,806 21,863 74,806
Ratios
FY10 Grow th Operating income (%) EBITDA (%) Adj PAT (%) Adj EPS (%) Profitability EBITDA margin (%) Adj PAT Margin (%) RoE (%) RoCE (%) RoIC (%) Valuations Price-earnings (x) Price-book (x) EV/EBITDA (x) EV/Sales (x) Dividend payout ratio (%) Dividend yield (%) B/S ratios Inventory days Creditors days Debtor days Working capital days Gross asset turnover (x) Net asset turnover (x) Sales/operating assets (x) Current ratio (x) Debt-equity (x) Net debt/equity (x) Interest coverage (4.6) 17.5 25.6 15.2 FY11 5.9 0.8 4.0 (15.5) FY12E 17.6 11.0 4.9 4.9 FY13E 61.3 45.7 2.1 2.1 FY14E 31.1 47.7 39.3 39.3
Cash flow
(Rs m n) Pre-tax profit Total tax paid Depreciation Working capital changes Net cash from operations Cash from investm ents Capital expenditure Investments and others Net cash from investm ents Cash from financing Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries) Net cash from financing Change in cash position Closing cash FY10 3,313 (547) 717 760 4,243 (4,846) (3,298) (8,144) 874 1,698 (334) 1,260 3,498 (403) 2,052 FY11 3,615 (580) 739 (3,897) (123) (8,308) (46) (8,354) 2,041 11,769 (399) (106) 13,305 4,829 6,881 FY12E 3,791 (758) 901 (823) 3,110 (12,000) (12,000) 6,500 (376) 6,124 (2,766) 4,115 FY13E 3,871 (850) 2,163 (3,646) 1,538 (6,500) (1,000) (7,500) 7,000 (376) 0 6,624 662 4,777 FY14E 5,533 (1,184) 2,488 (3,864) 2,973 (6,500) (1,000) (7,500) 3,000 (376) 2,624 (1,903) 2,874
Quarterly financials
(Rs m n) Net Sales Change (q-o-q) EBITDA Change (q-o-q) EBITDA margin PAT Adj PAT Change (q-o-q) Adj PAT m argin Adj EPS Q3FY11 3,471 -4% 1,109 6% 32.0% 702 702 7% 20.2% 13.4 Q4FY11 4,456 28% 1,286 16% 28.9% 766 766 9% 17.2% 11.9 Q1FY12 4,272 -4% 1,163 -10% 27.2% 732 732 -4% 17.1% 11.4 Q2FY12 4,586 7% 1,195 3% 26.1% 769 769 5% 16.8% 12.0 Q3FY12 4,810 5% 1,252 5% 26.0% 731 731 -5% 15.2% 11.4
Per share
Adj EPS (Rs) CEPS Book value Dividend (Rs) Actual o/s shares (mn) FY10 51.8 65.5 316.5 5.0 52.3 FY11 43.8 55.3 324.9 5.4 64.3 FY12E 45.9 59.9 364.9 5.0 64.4 FY13E 46.9 80.5 405.9 5.0 64.4 FY14E 65.3 104.0 465.4 5.0 64.4
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Focus Charts
Capacity expansion across the value chain... ... to drive revenue growth...
(Rs mn) 45,000 40,000
0.61mn mtpa
61%
35,000
0.85mn mtpa
30,000 25,000
34%
40% 30%
20% 10% 0% 15,705 18,473 FY12E 29,794 FY13E 39,057 -10% FY14E
5,000 0
FY11
% change (RHS)
EBITDA
FY11 50% 0% NA
FY12E 50% 0% NA
FY13E 46% 0% 0%
FY12E
FY13E
FY14E
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CRISIL Research Team
President
Mukesh Agarwal CRISIL Research +91 22 3342 3035 mukesh.agarwal@crisil.com
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Tarun Bhatia Prasad Koparkar Chetan Majithia Mohit Modi Jiju Vidyadharan Ajay D'Souza Ajay Srinivasan Rahul Prithiani Binaifer Jehani Manoj Mohta Sudhir Nair Senior Director, Capital Markets Senior Director, Industry & Customised Research Director, Equity Research Director, Equity Research Director, Funds & Fixed Income Research Director, Industry Research Director, Industry Research Director, Industry Research Director, Customised Research Director, Customised Research Director, Customised Research +91 22 3342 3226 +91 22 3342 3137 +91 22 3342 4148 +91 22 3342 2860 +91 22 3342 8091 +91 22 3342 3567 +91 22 3342 3530 +91 22 3342 3574 +91 22 3342 4091 +91 22 3342 3554 +91 22 3342 3526 tarun.bhatia@crisil.com prasad.koparkar@crisil.com chetan.majithia@crisil.com mohit.modi@crisil.com jiju.vidyadharan@crisil.com ajay.dsouza@crisil.com ajay.srinivasan@crisil.com rahul.prithiani@crisil.com binaifer.jehani@crisil.com manoj.mohta@crisil.com sudhir.nair@crisil.com
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Ashish Sethi Vinaya Dongre Siddharth Arora Sagar Sawarkar Deepak Mittal Prosenjit Ghosh Director, Capital Markets Director, Industry & Customised Research Director, Customised Research Associate Director, Equity Research Associate Director, Funds & Fixed Income Research Associate Director, Industry & Customised Research +91 22 3342 8023 +91 22 3342 8025 +91 22 3342 4133 +91 22 3342 8012 +91 22 3342 8031 +91 22 3342 8008 ashish.sethi@crisil.com vinaya.dongre@crisil.com siddharth.arora@crisil.com sagar.sawarkar@crisil.com deepak.mittal@crisil.com prosenjit.ghosh@crisil.com
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