Man Industries - Rs.83.00

Man Industries (India) Ltd. (MIL): Starting as an Aluminium Extruder in 1988, this ISO 14001, ISO 9001 & ISO 9002 company has now become a large player in the field of SAW Pipes. In the LSAW pipe segment it is a key supplier to oil & gas PSUs such as GAIL, ONGC, IOC, HPCL, BPCL, etc and has a strong clientele in international market also. MIL has already received approvals from global majors like Saudi Aramco, Shell, Qatar Petroleum, Bechtel, Total Fina Elf, etc. The company has manufacturing facility at Indore, MP to manufacture 6000 TPA of aluminum extrusions and 175,000 TPA of SAW pipes. The company has a technical collaboration with M/s.Haeusler of Switzerland. Recently, MIL along with its group company entered into a joint venture agreement with Aluchem, Inc. of USA to bid for new project in the Kutch region of Gujarat for manufacturing of alumina and alumina-based value-added products.

Going forward, MIL is set to benefit significantly from the huge demand opportunity in oil & gas pipelines. Based on the plans announced by domestic as well as global oil & gas majors, the demand for SAW pipes is expected to be 100,000-120,000 kms for the next 5-7 years. The domestic demand is expected to be in the region of 20,000 kms for the same period. To take advantage of this growing demand a new LSAW pipe mill is being setup in Anjar (Gujarat) at a cost of Rs.140 cr. that will add capacity of 2 lakh tonnes pa of SAW pipes and polyethylene coating capacity of 20,00,000 metres mainly to cater to the international market. This capital expenditure will be funded by internal accruals and foreign debt. MIL has already tied up the debt component of Rs 70 cr. with a five year foreign loan at Libor at 3%. Commercial production is expected to start from December 2004.

For FY04 sales grew 83 per cent to Rs. 502 cr. and NP increased by 213% to Rs.39.32 cr. leading to an
EPS of Rs.20.80 on an equity of Rs.18.90 cr. However its June '04 quarter was not upto the mark due to uncertainty of orders from PSU oil & gas companies pending the Lok Sabha elections, which delayed in finalising and placing the order. But now the picture is clear and orders are being placed. Currently, it has orders in hand of more than Rs.500 cr. out of which 70% is for export. With its new plant going on stream in December 2004, it is estimated that the company may achieve a turnover of Rs.550 cr. and NP of Rs.45 cr. for FY05, which will give an EPS of Rs.24. At CMP of Rs.83, it is quoting at less than 4 PE and cum dividend of 20%. Its share price can appreciate 100% from the current levels in 12-15 months time. Long term investors can hold it for higher returns since for FY06 as it is expected to post NP of Rs.60 cr. on sales of Rs.850 cr. leading to an EPS of Rs.32.