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Steady performance…

About the stock: Mishra Dhatu Nigam (Midhani) is a leading manufacturer of special steel, super alloys and titanium alloys catering to niche end-user segments like space, defence, etc.

* Within the overall steel market, Midhani’s area of focus is specialty steel

* Midhani’s product range includes superalloys, titanium and titanium alloys, special purpose steels and other special alloys

Q2FY22 Results: Midhani reports a steady set of numbers for Q2FY22.

* For Q2FY22, Midhani’s consolidated operations posted a topline of | 188 crore, up 15% YoY & 65% QoQ. Consolidated EBITDA for the quarter was at | 52 crore, up 4% YoY and 103% QoQ

* Midhani's consolidated EBITDA margin for Q2FY22 was at 27.6% compared to 22.4% in Q1FY22 and 30.5% in Q2FY21. Ensuing consolidated PAT for the quarter was at | 34 crore up 4% YoY & 82% QoQ

What should investors do? Midhani has given a return of 62% in the last three years (from ~| 122 in November 2018 to ~| 198 levels in November 2021).

* We downgrade the stock from BUY to HOLD

Target Price and Valuation: We value Midhani at | 210, 20x FY23E EPS.

Key triggers for future price performance:

* As on October 1, 2021, Midhani’s order book was at | 1370 crore compared to | 1402 crore as on July 1, 2021

* Over FY21-23E, we expect topline to grow at 18.3% CAGR while EBITDA and PAT are expected to register a CAGR of 10.5% and 8.7%, respectively

Alternate Stock Idea: Within our steel sector coverage we like Ratnamani Metals and Tubes (RMTL).

* Leadership position in stainless steel pipes and tubes segment, differentiates RMTL from its peer group

* BUY with a target price of | 2450

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