Buy Man Industries Ltd For Target Rs. 450 - Choice Broking Ltd
Core Business Well Complemented by Non-Core Asset Monetisation
We maintain our BUY rating on Man Industries Ltd (MAN) with a revised target price of INR 450/share (from INR 409 earlier) as we factor in 1) Capacity addition at Jammu (20 KT Stainless Steel pipes facility at an outlay of INR 5.6Bn) and at Saudi (300 KT H-Saw Pipes facility at an outlay of INR 6Bn), 2) Revenue/EBITDA CAGR of 19/25% over FY25-28E driven by order book of INR 25Bn and bid pipeline of INR 150Bn, 3) Cash inflow from Navi Mumbai land parcel monetisation of ~INR 7.5Bn (~33% of current Market Capitalisation) spread over the next 5-6 years, 4) EBITDA margin expansion of ~123 bps over FY25-28E driven by increasing share of value added products and operating leverage benefits of higher capacity utilization at the current plants, and 5) Robust EV to CE (Enterprise Value to Capital Employed) based valuation framework (Exhibit 2) which allows us a rational basis to assign a valuation multiple that captures improving fundamentals.
We arrive at a 1 year forward TP of INR 450/share for MAN. We now value MAN on our EV/CE framework where we assign an EV/CE multiple of 1.25/ 1.25x for FY27E/ 28E, which we believe is conservative given strong ROCE even under reasonable operational assumptions. This valuation framework gives us the flexibility to assign a commensurate valuation multiple basis an objective assessment of the quantifiable forecast financial performance of the company We do a sanity check of our EV/CE TP using implied EV/EBITDA, P/BV, and P/E multiples On our TP of INR 450 FY28E implied EVEBITDA/PB/PE multiples are 5.7x/1.2x/9.2x. Slow down in conversion of bid pipeline into order book and slow ramp up of upcoming capacities are risks to our BUY rating.
Q4FY25: Strong Operational Quarter (Consolidated)
* Consol Revenue / EBITDA / PAT came in at INR 12.2Bn (+50.3%/66.6% YoY/QoQ) / INR 1.2Bn (+107.6%/53.9% YoY/QoQ) / INR 0.7Bn (+182%/100% YoY/QoQ) vs CEBPL estimates of INR 8.5Bn / 1.01Bn / 0.5Bn respectively. These results also include the benefit of INR 3.5Bn/0.5Bn in accounting Revenue /EBITDA due to the land monetisation transaction. Annual contribution from Marino Shelters deal will be in the range of INR 1-1.2Bn for the next 6 years, with nil associated expenditure.
* Core consol Revenue/EBIT came in at INR 8.5/6.6Bn.
* Current order book stands at INR 25Bn while the bid pipe line is healthy at ~INR 150 Bn.
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