Buy MOIL Ltd For Target Rs.360 by Axis Securities
Investment Rationale
* Largest producer of manganese ore in India with access to significant reserves: With a thrust on expansion and modernization of its mines along with progress on resources and reserves (R&R) addition MOIL was able to come out of its rangebound production level of 11-13 Lc T during FY20-23 to 17.56 Lc Tonnes in FY24 and it managed to clock in the record production volumes at 18.02 Lc tonnes up 3% YoY in FY25. It also clocked record manganese ore sales at 15.87 Lc tonnes, registering a growth of 3.3% YoY. Ferro Manganese production also stood at record level at 12,000 MT up 18% YoY. The company has around 121.97 MT of R&R as of Mar’25.
* Ambitious production target to fulfill domestic demand: Total EC capacity of MOIL as on Mar’25 stood at 26.8 Lc tonnes per annum (24.9 Lc tonne per annum in FY24) and it plans to increase its mining capacity to 50 Lc tonnes by FY30 in order to meet the growing steel demand in India. With the increased mining capacity it targets to achieve production target of 3.50 MT by 2030. To achieve these targets, MOIL is giving utmost thrust to exploration, MOIL has carried out its best ever exploratory core drilling of 1,07,530 in FY25, a 22% growth YoY. This is over and above the 100% growth witnessed in FY24 when the Exploration core drilling level reached at 87,661 meters. In order to achieve the 3.5 MT production capability by 2030, MOIL has earmarked total capex of Rs 2,400 Cr which it will spend in phased manner on exploration, projects, shaft sinking projects and expansion of business operation in other states through JVs etc.
* Steel demand tailwind and import substitution potential: India’s finished steel consumption is growing in double digit range of 10-14% since FY22 and has reached 150 MT in FY25. Crude steel production increased from 89 MT in FY15 to 151 MT in FY25, a 5.4% CAGR over the same period. As per National Steel Policy 2017, India’s Steel Production capacity and production target is to reach 300 MT and 255 MT by 2030 respectively, which will require 11 MT manganese ore, indicating huge growth potential for MOIL. In FY25, domestic manganese ore production stood at only 3.75 MT (up 11% YoY) (our of which MOIL’s share stood at 1.8 MT, ~48%), and India imported ~6.58 MT (5.6 MT in FY24) of ore. Large demand supply gap in Indian Manganese Ore market presents an opportunity for import substitution.
Valuation & Recommendation:
MOIL is currently trading at 12MF P/E of 12.3x and 12MF EV/EBITDA of 7.8x. We recommend a BUY rating on the stock with a target price of Rs 360/share, implying an upside of 10% from the CMP.
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SEBI Registration number is INZ000161633
