indsil hydro power & manganese ltd (code 522165) - mps's value pick for aug 2010

8/7/2019 Indsil Hydro Power & Manganese Ltd (Code 522165) - MPS's Value Pick for Aug 2010

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MPSs Value pick stock for the month of August 2010

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HBJ Capital Services Pvt Ltd

Web: www.hbjcapital.com

E-Mail: [email protected]

Call: +91 98867 36791


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Overview


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Basic Details

INDSIL HYDRO POWER & MANGANESE LTD.

The com an was incor orated on 31st Au '90 romoted b S N Vardara an.

Products:

LCSM ( Low Carbon Silico Manganese)

Regular Silico Manganese

Hydro Power & Thermal Power

In 1998-99, the company was awarded KSIDC'S AWARDS FOR EXCELLENCE-99.

It had signed MOUs with state electricity boards for establishing 71-MW Hydro Power projectsfor captive consumption to ensure full power supply in its early stage.


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Basic Details

The company is having various plants at different locations:

Raipur Smelter with the Annual capacity of 24,000 Tons.

Palakkad Smelter: The Plant has capacity of 14,000 tons per year for LCSM & Steelmelt shop with capacity of 30,000 tons per year.

Raipur Thermal Power Plant: This is under Indsil Energy & Electrochemical Ltdwith annual generation of 90million units. This is a 12 MW Coal Fired Plant.

Rajakkad Hydro Power Plant: This is under Indsil Electro smelts Ltd with 21 MW

INDSIL HYDRO POWER & MANGANESE LTD.

capacity and its Average Annual output is 55 Million KW.

Company believes in sharing its wealth with shareholders with their regular dividend policyand it has recently announced Bonus issue. Record Date for Bonus issue will be announced on23rd August 2010 in its 20th AGM.

Company has recently taken the route of long-term contractual relationships with specificbuyers for marketing its alloys. This would help preventing sudden erosions in value duringany down cycle. Such contracts are already in place and therefore, the Smelter Division isexpected to show robust financial results in the coming years.


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Performance

INCOME STATEMENT

(in Cr.) 2009-10(9 months)

2008-09 2007-08 2006-07

Revenue 66.49 65.26 88.01 51.98

Other Income 0.57 0.45 0.69 0.34

Total Income 67.06 65.71 88.70 52.32

Expense -51.35 -55.17 -62.94 -39.92

The financial year of the company is July toJune.

Performance of the company was affected in FY09 due to recession in the year 2008-09.

The company was doing well in its sector and

having unique product called as LCSM.

Interest -1.14 -2.35 -2.96 -3.49

PBDT 14.58 8.18 22.81 8.91

Depreciation -2.64 -3.50 -3.50 -3.46

Tax -- -0.93 -1.48 -0.55

Net Profit 11.92 2.83 17.83 4.9

EPS 12.59 3.00 18.87 --

NPM% 17.78% 4.34% 20.26% 9.42%

The company is very strategic with itsoperations, supply of power is being done by itsown power plant which helps to reduce costand thus maintain good margins in comparisonto peers.

The company is expected to close the FY 10 witha net profit in excess of Rs 11 crore and an EPSof Rs 12. The tax provision will be made in theJun10 quarter


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Performance

The financial performance of the company inthe last 9 months has improved from the lastyear.

Company has been able to improve because ofits turn around step of long term contractswhich gives less exposure to the fluctuatingprice of the commodity.

QUARTERLY RESULTS(in Cr.) Mar-10 Dec-09 Sep-09 Jun-09 Mar-09

Revenue 23.08 24.62 19.36 21.19 14.08

Expense -18.04 -18.84 -14.47 22.89 -12.5

Interest -0.41 -0.38 -0.35 -0.66 -0.51

PBDT 4.63 5.41 4.54 -1.82 1.12

ompany as a rea y pos e ro e ore axof Rs. 11.92 crore in the first nine month periodof this FY.

Profit After Tax for FY 2008-09 was Rs 2.83

crore whereas the company has already posted8.41 crore PAT in nine months of FY 2009-10.

The company is roughly available at a PEmultiple of 7.5, while the capacity of LCSM isexpected to expand by almost 100% in FY 11.

Depreciation -0.88 -0.88 -0.88 1.75 -0.88

Tax -- -- -- -0.91 -0.01

Net Profit 3.74 4.52 3.66 -1.89 0.23

EPS 3.93 4.79 3.87 -- 0.25

NPM% 16.4% 18.5% 19.01% -8.92% 1.65%


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Future Prospects..

DOMESTIC EXPANSION

Company plans to nearly double its capacity to make Low Carbon Silico Manganese with aninvestment of Rs 27 crore, it will be managed by internal accruals and debt.

The company will carry out de-bottlenecking operations at its existing Palakkad facilities,resulting in a capacity expansion of around 30%.

It will set up a Green Field Smelter in Chhattisgarh that is expected to become operational byJune 2011 and company will be capturing new revenues from 2011-12.

This will increase the company's capacity for Low Carbon Silico Manganese to 28,500 tons perannum from 14,400 tons.

Company has also entered in other potential regions like Southern Europe and US Market.

As per the projections, company will be raising its revenue to 210 crore in the FY 2011-12 andPBT will be around 32 crore.


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Future Prospects..

NEW VENTURE @ OMAN Indsil Group has entered into a 50:50 joint venture with the Muscat Overseas Group in Oman.

Indsil Hydro Power and Manganese will hold 25% stake in the Joint Venture.

Company will build a world class, cost effective chrome smelter in the Sultanate of Oman.

Company will set up a 75,000 TPY Ferro Chrome Smelter in Oman, it will cost around 140crore.

Indsil would be bringing in technological, operating and marketing expertise into the venture.

The Muscat Overseas Group owns and runs the largest chrome ore mines in the Sultanate ofOman and they would be bringing in the chrome ore feedstock required for the proposedsmelter.

Oman has the credentials in terms of availability of medium grade chrome ores and electricpower is available in abundance at economical rates.

This venture is expected to yield revenues of around USD 75 million per annum and is expectedto be operational by end of 2011.


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Shareholding Pattern..

EQUITY DISTRIBUTION

Promoter holding is more than 50%. Kerala State Industrial development Corporation also has 6.65 % stakewhich indicates the interest of government in the company.

27% Shares are in Strong hands signaling long term investors leveraging upon the future prospects of thecompany.


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Technical View..

Strong support at 78

Increase in volume with increase in share rice

The INDSIL stock price has a strong Support at 78 levels.

As depicted in the chart, the share price of INDSIL recently increased with the increase in volumes.

Due to the bad market sentiments this stock didnt get the visibility, However at CMP it should be looked asan opportunity to take exposure in the stock.


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Conclusion

Indsil Hydro Power and Manganese is an ideal pick for the Value Pickrecommendation based on its current valuations and the expansion projectsof the company.

Indsil has initiated the process of expanding its LCSM facility from 14,000TPA to 28,000 TPA. The same will start contributing to the revenues inJun11.

The company has further entered into a JV agreement with Muscat Overseas

VALUE PICK OF THE MONTH

group n man or e purpose o se ng up a , erro romesmelter. The project would have access to 100% captive chrome andtherefore the margins would be high.

The company has been repaying debt and has brought down the same fromRs 40 crore at the end of Jun06 to Rs 18 crore at the end of Jun09.

Taking into account the current PE of 7.5 and the proposed expansion ofmore than 100% expansion, Indsil Hydro has very low downside risk andshould see a stock price appreciation in excess of 70% in next 8-12 months.


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indsil hydro power & manganese ltd (code 522165) - mps's value pick for aug 2010

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