Man Industries (India) Ltd - Rs 58.00
Established in 1988 as an aluminium extruder, Man Industries India Ltd (MIIL) today is one of India's largest producers and exporter of large diameter Longitudinal submerged arc welded (LSAW) pipes and Helically submerged arc welded (HSAW) pipes. These pipes are made from steel plates and steel coils. LSAW line pipes are generally used in transportation of oil and natural gas in high temperature and pressure applications in refineries and petrochemical units apart from finding application in fertilizers and dredging industry. On the other hand HSAW pipes are used under low pressure condition for transportation of oil, water, sewerage, agriculture and in construction sector. Company has the capability to manufacture LSAW pipes with outer diameter ranging from 16~60 inches and wall thickness of 6~38 mm upto maximum pipe length of 12 mtrs. Whereas for HSAW it can make pipes having 16~84 inches of outer diameter upto maximum length of 18 mtrs. Infact it is the only company in India to manufacture 18 mtr long HSAW pipe. Well, MIIL is also a leading provider of anti-corrosion coatings and cement mortar coatings for SAW pipes. Besides it is a significant size player in spirally welded pipes as well.
Currently, MIIL has two manufacturing plants – one at Pithampur, MP and other at Anjar, Gujarat having combined installed capacity of 500,000 MTPA of LSAW pipes and 300,000 MTPA of HSAW pipes. Out of this new production line for 200,000 MTPA of HSAW pipes was commissioned only from Sept 2007. But more importantly, couple of days back MIIL has started another production line for HSAW pipes with a name plate capacity of 200,000 MTPA thereby equalizing the total production capacity to 500,000 MTPA each. Along with this company has bagged new orders to the tune of Rs 1100 cr (domestic Rs 700 cr & export Rs 400 cr) taking the current order book position to Rs 1500 cr. It has a recent track record of bagging a single order worth nearly Rs 1000 cr from a single US client which proves the strong credentials and execution capability of the company. With a vision to become a true global player, MIIL has acquired 155 acres of land in Little Rock, USA for putting up state-of-the-art HSAW pipe manufacturing plant having capacity of 300,000 MTPA at an estimated investment of Rs 400~450 cr. This project is expected to commence operation by FY10, if things worked out as per plan.
The demand for SAW pipes is significantly dependent upon the level of exploration activities and transportation of oil and natural gas in India and globally, which is currently being driven up by strong crude oil prices. Incidentally, concentration of source of crude in the Middle East augurs well for Indian pipes manufacturers as they have the advantage of being in the close proximity to Middle East vis-a-vis other major pipe manufacturers in Japan or Europe. A recent entrant in the growth drivers of pipes is the demand arising from the replacement of old pipelines, dominantly in the USA and Russia. Moreover the domestic demand is also high with various organizations have put their plans to lay pipeline infrastructure for oil transportation. To conclude, the easing of steel availability post Beijing Olympics with downward trend in the metal prices globally and significant correction in shipping freight will have positive impact on the company’s bottomline going forward.
In order to fund its expansion, MIIL had raised around Rs 200 cr in May 2007 thru FCCB route to be converted into equity shares @ 143.50 per share. Since then, not a single bond has been converted and considering the CMP the chances of conversion in near future is minimal despite downward revision of conversion price. For FY08, its sales as well as net profit increased by 30% to Rs 1500 cr and Rs 71 cr respectively. Hence it posted an EPS of Rs 13 on equity of Rs 26.65 cr having face value as Rs 5/- per share and declared 30% dividend. Although company posted disappointing nos for Q1FY09 still on the back of expanded capacity it may report a topline of Rs 1750 cr and bottomline of Rs 75 cr i.e. EPS of Rs 14 on current equity. Ironically, company’s share price has drastically corrected by 70% from its high of Rs 177 in Jan’08. Investors can safely buy this scrip at current levels for a price target of Rs 90 within 9~12 months.
No comments:
Post a Comment