Moil Emkay 120115

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Emkay

India Equity Research | Metals & Mining

December 30, 2014

Initiating Coverage

MOIL

Poised for growth

CMP Target Price

Rs293 Rs380 ()

Rating Upside

BUY () 29.0%

Change in Estimates

EPS Chg FY15E/FY16E (%) NA

Target Price change (%) NA

Previous Reco NA

Emkay vs Consensus

EPS Estimates

FY15E FY16E

Emkay 29.3 32.0

Consensus - -

Mean Consensus TP Rs 327

Stock Details

Bloomberg Code MOIL IN

Face Value (Rs) 10

Shares outstanding (mn) 168

52 Week H/L 342 / 210

M Cap (Rs bn/USD bn) 49 / 0.77

Daily Avg Volume (nos.) 67,829

Daily Avg Turnover (US$ mn) 0.3

Shareholding Pattern Sep '14

Promoters 80.0%

FIIs 7.3%

DIIs 2.6%

Public 8.2%

Price Performance

(%) 1M 3M 6M 12M

Absolute (7) 4 (9) 20

Rel. to Nifty (3) 1 (17) (7)

Relative price chart

Source: Bloomberg

-10

-4

2

8

14

20

200

230

260

290

320

350

Jan-14 Mar-14 May-14 Jul-14 Aug-14 Oct-14 Dec-14

%Rs

MOIL (LHS) Rel to Nifty (RHS)

MOIL is the largest manganese ore producer in India, constituting ~50% of the total

domestic production. Globally, it ranks fifth among all the manganese ore producers

Pick up in volumes on the back of its capacity expansion to 1.5 mtpa by FY17E is likely

to be the key driver. Low cost of production and better product mix to ensure healthy

margins, going ahead

MOIL's net cash per share stood at Rs 170 in H1FY15. The company has a planned

capex of Rs 1.53bn and Rs 1.3bn in FY15 and FY16 respectively. Better utilizations of

cash- spending on growth projects, higher dividend etc- to augur well for MOIL

At the CMP of Rs 293, the stock looks attractive with potential upside of 29%. We value

the stock by taking an average of FY16 (5.5x) and FY17 (5x) EV/ EBITDA valuation. We

initiate coverage on MOIL with a Buy rating and a target price of Rs 380

Volume growth to be visible at 5% CAGR over FY14-17E

After witnessing stagnant volumes for the last few years, MOIL is all set to experience a

gradual improvement in volume growth till FY17E. The FY17 exit rate has been targeted at

1.5 mt, while the company plans to ramp up the volumes to 2 mt in 2020. With addition in

steel capacities in India in the next few years and scope for import substitution of low quality

ore, we expect higher demand for manganese ore. Higher capacity along with negligible

additions by peers are likely to help MOIL gain market share.

Low cost of production and better product mix to ensure strong margins

MOIL is among the lowest cost producers of manganese ore in the world at just US$70- 72/

tonne. Also, despite recent weakness in global prices, MOIL’s realizations remained stable,

due to its better product mix. Going ahead, we expect it to maintain its margin at ~50%. The

management expects global prices to bottom out in Q1FY16, which will be an additional

positive for MOIL.

Debt free company with strong cash on books

MOIL is a debt free company with strong cash of Rs 29 bn, comprising of 57% of the market

cap. Better usage of cash e.g. investment in growth projects, acquisition of mines, higher

dividend payout etc. would be positive triggers for the company.

Valuations attractive; Recommend BUY

At the CMP of Rs 293, the stock is trading at 8.5x FY17 EPS and 2.1x FY17 EV/ EBITDA,

which is definitely attractive compared to other mining companies. We initiate coverage on

MOIL with BUY rating and target price of Rs 380 taking an avg. valuation for FY16 and FY17.

Financial Snapshot (Consolidated)

(Rs mn) FY13 FY14 FY15E FY16E FY17E

Net Sales 9,671 10,213 10,188 10,709 11,591

EBITDA 4,345 5,012 4,764 5,177 5,618

EBITDA Margin (%) 44.9 49.1 46.8 48.3 48.5

APAT 4,317 5,096 4,922 5,376 5,814

EPS (Rs) 25.7 30.3 29.3 32.0 34.6

EPS (% chg) 5.1 18.0 (3.4) 9.2 8.1

ROE (%) 16.6 17.3 14.9 14.6 14.1

P/E (x) 11.4 9.7 10.0 9.2 8.5

EV/EBITDA (x) 6.1 4.3 3.9 3.0 2.1

P/BV (x) 1.8 1.6 1.4 1.3 1.1

Source: Company, Emkay Research

MOIL (MOIL IN) India Equity Research | Initiating Coverage

Emkay Research | December 30, 2014 2

Investment arguments

Largest producer of manganese ore in India

MOIL accounts for about 50% of the total manganese ore production in India. The company has

virtually no competitor in India, as others have very little reserves and resources. At present, out

of ~5 mt consumption of manganese ore in India, half is produced domestically and rest is

imported. Out of the domestic production, MOIL is the largest player with ~50% market share.

The rest include Tata Steel, OMC and others.

Exhibit 1: Major Manganese ore producers in India

Producers Location of Mine Grade of

District State Ore

MOIL (Manganese Ore India Ltd.) Balaghat M.P.

HG + MG Bhandara Maharashtra

Nagpur

Tata Steel Ltd. Keonjhar Odisha MG

Sundergarh

The OMM (P) Ltd. Sundergarh Odisha MG

M.L. Rungta Keonjhar Odisha MG

RBSSD & FN DAS Vizianagaram Andhra Pradesh MG + LG

The Sandur Manganese & Iron Ores, Bellary, Karnataka Bellary Karnataka MG + LG

Gujrat Mineral Development Corporation Panchmahal Gujrat MG

Others Goa, Jharkhand, Rajasthan MG + LG


Good quality of reserves

MOIL currently operates seven underground mines (Kandri, Munsar, Beldongri, Gumgaon,

Chikla, Balaghat and Ukwa mines) and three opencast mines (Dongri Buzurg, Sitapatore/ Sukli,

and Tirodi) located in the states of Maharashtra and Madhya Pradesh. As per the latest JORC

report prepared by IMC, MOIL has 21.7 million tonnes of proved and probable reserves and a

total of 69.5 million tonnes of measured, indicated and inferred mineral resources of manganese

ore. An area of approximately 814.7 hectares in the State of Maharashtra has been allocated to

MOIL by the Ministry of Mines in October 2009. The company has applied for a prospecting

license for that. Among the total ore reserves, the average manganese content ranges from

36.0% to 39.9% with no reserve below 30% manganese content.

Exhibit 2: Manganese ore Reserves & Resources (in million tonnes)


Volume growth to be the key driver- Expect visible growth over FY15-FY17

MOIL, during its IPO in 2011, had given a guidance that it would increase its volume to 1.5 mtpa

by FY14. Though, the same got delayed, due to delay in approval and weak market sentiment,

the management is confident of achieving this figure by FY17. We believe this would be the exit

rate for FY17. We have conservatively assumed the volume to be 1.29 mt in FY17 as against

1.13 in FY14.

0

50

100

150

200

250

300

350

400

450

Reserves Rsources Total

MOIL India (Incl MOIL)



Exhibit 3: Sales volume (KT) expected to grow 4.7% CAGR over FY14-17E

850

1,000

1,150

1,300

1,450

FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Prod Vol (kt) Sales Vol (kt)


Looking at quarterly volume data, we see a stable trend, where H2 has always been better than

H1. In Q2FY15, the proportion of ferro grade ore rose to 1.3 mt helping better average

realizations of Rs 8,685/ tonne.

Exhibit 4: Quarterly sales volume mix (in lakh tonnes)

0.7 0.8

0.5 0.50.7 0.7

0.40.3

2.1

2.8

2.1 2.12.2

2.6

1.7

2.1

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Fines Non Fines


Expansion projects to ensure higher volume

In order to achieve a volume of 1.5 mtpa by FY17 and then 2 mtpa by FY21, MOIL has already

taken up various projects in mines. After shaft sinking, normally it takes 2 years for a mine to

start production. Following are the details of various projects:

Sinking of new vertical shafts- Recently completed for Ukwa and Musar mines at a cost of

Rs 430 mn; production is expected from FY17- FY18 onwards. In the first year, the

production is likely to reach 10 kt and gradually, that should go up to 70- 80 kt. Gumgaon

project also completed two years back.

Deepening of existing vertical shafts- Other than Balaghat mine, this is going on at Chikla

Sinking of a large diameter high speed vertical shaft at Balaghat mine

Sinking of 2nd vertical shaft- going on in Chikla, Ukwa and Munsar

Large scale open cast mine development at Dongri Buzing- This mine will remain open cast

11 years from now and after 5- 6 years, the company might think of a shaft sinking for the

future prospect of going underground

Setting up integrated manganese beneficiation plants

Capacity expansion of ferro manganese plant- The company plans to increase the capacity

from 10 kt to 45 kt. MECON is conducting the feasibility study for the same

In 2013, the Maharashtra government had granted Prospecting License (PL) to MOIL for 11

blocks spread over 597 hectares in Nagpur and Bhandara districts. So far, the company has

been able to complete prospecting 391 hectares. As per the geo political study that is currently

going on, occurrence manganese ore has been identified in three areas. After this, drilling has

to be started and it might take 3- 4 years before it starts production. Also, very recently, the

company was granted an area of 48.974 hectare by the Ministry of Mines in Balaghat district of

Madhya Pradesh. This falls under Ukwa mine.



Steel capacity addition to generate demand

Slow growth of steel industry has raised some worries on the demand for manganese ore in

India. However, new steel capacity addition is on the cards in India, both in FY16 and FY17. This

should help the revival in demand for manganese ore.

Despite slow demand growth for steel in India, capacities are getting added by most of the major

players. Over and above the 104 mt steel capacity in FY14, we expect another 8 mt, 7mt and

5mt capacity to be added in FY15E, FY16E and FY17E respectively. This takes the total added

capacity to 124 mt against the 12th five- year plan projection of 149 mt. Assuming 80% utilization,

the steel production should be ~100 mt. As per our estimates, the manganese ore requirement

for this would be about 5.4 mt in FY17E.

Even if MOIL achieves its production target of 1.5 mt in FY17 and assuming another 1.6 mt

capacity addition by other Indian producers, India will still require to import ~2.3 mt. Thus, the

market will have enough demand to absorb the higher production. MOIL, in this sense, is likely

to gain market share, as we understand pace of new capacity addition by other players is unlikely

to be substantial. We would also like to highlight here that our assumption of steel capacity

addition in FY17 is lower than envisaged in the report by the working committee on steel and

coal.

Exhibit 5: Projected steel capacities and production

Particulars FY15E FY16E FY17E

Production of Finished Steel 96.9 108.05 118.7

Production of Crude Steel 107.7 120.1 131.9

Crude Steel Capacity 119.7 133.4 146.6

Source: Industry, Emkay Research

Exhibit 6: Projected Manganese ore demand

Particulars FY15E FY16E FY17E

Production forecast 2.7 2.9 3.0

Future demand 5.0 5.3 5.7

Supply Gap 2.3 2.5 2.7

Source: Industry, Emkay Research

Exhibit 7: Our estimates of steel capacity additions in India over FY15-17E (in mn tonnes)

Source: Emkay Research

Import substitution also likely to be a driver

We believe majority of the imports are of high grades, which India does not produce. As per the

latest available import data, out of the total manganese ore imports, '35% and more' grade

contributed 92%. Even if the entire import substitution may not happen, we believe there is

possibility for MOIL to capture a portion of the low grade ore (between 35% and 46% Mn grade).

Also, one interesting thing that needs to be noted here is most of the imported high grade

manganese in India is used in making Silico manganese, which is exported back again, as India

is the largest exported of Silico manganese in the World.

104.0

124.0

8.0

7.0

5.0

90

95

100

105

110

115

120

125

130

FY14 Existing Addn. in FY15E Addn. in FY16E Addn. in FY17E Capacity in FY17E



Exhibit 8: Grade wise import of manganese ore in India

Grade of Manganese

Ore (Tonnes)

30% or more but

below 35% Mn

35% or more but

below 46% Mn

46% or

more Mn

Ferruginous,

10% or more Others

Manganese Ore

(Total)

2008-09 1,040 40,480 37,360 - 1,120 80,000

% of Total 1.3% 50.6% 46.7% - 1.4% 100.0%

2009-10 0 48,150 26,625 - 225 75,000

% of Total 0.0% 64.2% 35.5% - 0.3% 100.0%

2010-11 260 75,270 53,170 - 1,300 1,30,000

% of Total 0.2% 57.9% 40.9% - 1.0% 100.0%

2011-12 (P) 1,560 1,06,470 85,020 - 1,950 1,95,000

% of Total 0.8% 54.6% 43.6% - 1.0% 100.0%

2012-13 (P) 4,400 1,22,540 79,640 4,180 9,240 2,20,000

% of Total 2.0% 55.7% 36.2% 1.9% 4.2% 100.0%

Source: IBM, Emkay Research

Low cost - high margin structure

MOIL is one of the lowest cost producers of manganese ore in the world with the average cost

of production being ~US$71/ tonne compared to ~US$260/ tonne for BHP Billiton. Backed by

lower costs, MOIL enjoys one of the best margins in the business.

Exhibit 9: EBITDA margins (%) - One of the best in the industry

70.9

61.9

67.3

48.2

44.9

49.1

46.8

48.348.5

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

80.0



Strategic location

All the mines of MOIL are located in states of Maharashtra and Madhya Pradesh i.e. Central

India. This provides logistical benefits to various consumers in India, giving MOIL an edge over

its competitors, who are concentrated primarily in Eastern India.

Product mix helps in offsetting pricing worry to some extent

Manganese ore prices have fallen in the recent past across the globe due to weak demand and

higher supply. This has been a worry for MOIL too, as cheaper imports are putting pressure on

the domestic prices. Our analysis of the global price movement in iron ore and manganese ore

shows there has not been any significant correlation between prices of these two minerals. This

is especially true in the last one year. We can infer that we may not see a drastic correction in

manganese ore prices as we have seen in iron ore recently.

Exhibit 10: Iron ore prices vis a vis manganese ore prices

3.0

3.5

4.0

4.5

5.0

5.5

6.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Oct-12

Nov-

12

Dec-

12

Jan-1

3

Feb

-13

Mar-

13

Apr-

13

May-

13

Jun-1

3

Jul-13

Aug-1

3

Sep-1

3

Oct-13

Nov-

13

Dec-

13

Jan-1

4

Feb

-14

Mar-

14

Apr-

14

May-

14

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct-14

Nov-

14

Dec-

14

Iron ore (62% Fe) Mn Ore (RHS)




As compared to global manganese ore prices, we observe MOIL’s realizations have been more

stable. This can be attributed to MOIL’s better product mix. Going forward, we expect the

realizations to remain stable over FY15- FY17.

Exhibit 11: Realizations (Rs/tonne) are expected to remain stable over FY15-17

11,600

7,744

10,701

7,516 7,467

8,351 8,472 8,400 8,400

5,500

6,500

7,500

8,500

9,500

10,500

11,500

12,500



Debt free company; Going forward, cash utilization concerns to be addressed

MOIL is a debt free company with cash reserves of ~Rs 28.7 bn in H1FY15 or ~Rs 170/ share.

This makes the company well positioned for any expansionary activities or acquisition of mines

(in India or abroad) whenever such opportunity comes. Cash utilization due to project delays has

been an overhang on the stock. We expect this to change in the coming years as MOIL effectively

deploys its cash for capacity expansion. Initially, MOIL had a total planned capex of Rs 7,680

milion for volume expansion to 1.5 mtpa. The company spent Rs 570 mn in FY13 and Rs 850

mn in FY14. For FY15 and FY16, the capex has been set at Rs 1.53 bn and Rs 1.3 bn respectively.

Exhibit 12: Cash per share to grow

88.5111.9

124.3

135.5

166.2182.3

201.0

223.1

50

100

150

200

250

FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E


As per the company, the cash would eventually get utilized in the ongoing and upcoming bigger

projects. Recently, the company got a new mining lease in Ukwa mine, where it expects to spend

Rs 1 bn. Also at Balaghat, expansion of ferro manganese project and doubling of mining output

would entail about Rs 7 bn expenditure. For all the capital projects, the total investment is

envisaged at Rs 31.26 bn over FY14 and FY21. Major areas of investment would be mining

projects, JVs, new area development, acquisition of mines abroad etc. For the new area

development, Rs 2.5 bn has been earmarked while, Rs 5 bn has been allocated for acquisition

of mines abroad as per the corporate plan of the company.



Dividend policy: There is scope of improvement

MOIL has been a dividend paying company. The payout has been in the range of 20% till FY13.

In FY14, the company increased its interim dividend to 40%, leading to a total Rs 7.5/ share

dividend and the rise in payout to 25%. Even if the company pays Rs 7.5/ share dividend in

FY15, at the CMP of Rs 293, the dividend yield stands at 2.5%. This, we believe, is low given

the current cash balance and visible capex situation of the company.

Exhibit 13: Dividend per share

7.9

5.6

7.0

5.05.5

7.5

6.57.0 7.0

2.0

4.0

6.0

8.0

10.0





Financials

Topline to witness modest growth

As volumes remained stable over the past few years, the topline growth was a function of prices

and product mix. From FY10 to FY14, the topline grew at a CAGR of 1.5%. Going forward, as

we see gradual recovery in volume with stable prices, we expect the topline to grow at a better

CAGR of 4.6% between FY14 and FY17.

Exhibit 14: Topline to grow at a better CAGR of 4.6% (Rs mn)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


Revenue


EBITDA margins to remain stable

MOIL has been one of the lowest cost producers of manganese ore in the world. Along with this,

stable price realizations have been helpful for the company as far as its margins are concerned.

MOIL had posted 67% EBITDA margin during FY11. However post that, it fell to 45% in FY13

on account of fall in manganese ore prices. Margins improved to 49% in FY14 and we expect

margins to remain near these levels. Price hike in manganese ore would help in better margins.

Exhibit 15: EBITDA margins to remain stable at current levels

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

0

2,000

4,000

6,000

8,000

10,000


EBITDA EBITDA margin


Exhibit 16: Cost break up: Ore raising and operating expenses


0%

20%

40%

60%

80%

100%

FY11 FY12 FY13 FY14

Employee Transport Stores & spares Power & fuel Repair etc Other



Profitability likely to improve

On the back of better topline growth and stable operating margins, we believe the company

should see better growth in the PAT as well. From FY10 to FY14, the PAT grew at CAGR of

2.2%. We expect the same to improve to 3.3% between FY14 and FY17. Assuming Rs 7/ share

dividend in FY17, the company is still likely to generate a cash of Rs 3.75 bn in FY17.

Exhibit 17: Profit (Rs mn) and NPM trend

35.0

40.0

45.0

50.0

55.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Adj. PAT PAT margin (RHS)


Exhibit 18: Sensitivity to change in Mn ore volumes

Sales volume (mt) EBITDA (Rs mn) EPS (Rs) TP (Rs)

1.1 4,534 30.3 341

1.2 5,076 32.4 361

1.3 5,618 34.6 380

1.4 6,159 36.8 400

1.5 6,701 38.9 419


Exhibit 19: Sensitivity to change in Mn ore NSR

NSR (Rs/tonne) EBITDA (Rs mn) EPS (Rs) TP (Rs)

7,560 5,076 32.4 361

7,980 5,347 33.5 371

8,400 5,618 34.6 380

8,820 5,889 35.7 390

9,240 6,159 36.8 400




Key concerns

Fluctuation in manganese ore prices

Price of manganese ore have been volatile and any sharp fall in prices would put pressure on

the margins and on the overall performance of the company. Though, recently there has not

been any correlation between manganese ore and iron ore, any similar movement in manganese

ore would be detrimental for MOIL

Delay in reserve accretion

MOIL’s mines are century old. Increase in underground mining activities and deepening of shafts

may start escalating costs. Also, delay in getting new mines developed and slow addition to the

reserve would raise concerns.

Regulatory delay

Delay in getting approvals for various mining projects, land acquisition for new projects,

unfavorable policy issues could be hindrances and cause delay in timely volume addition.

OFS at any significant discount

The government has been planning for a stake sale in the company through OFS route. Any

offer price at a significant discount to the current market price would be a deterrent for the near

term

Application of additional levy as proposed in MMDR (Act) amendments

The recently proposed amendments in the MMDR (Act) though has not mentioned any amount

but highlighted that there would be a levy on the miners related to the royalty. Though,

sentimentally this may provide a respite if 100% royalty sharing clause is removed, on an

absolute basis this would have adverse impact on the margins



Valuation attractive, providing upside of 29%

At the CMP of Rs 293, the stock discounts its FY16E and FY17E earnings by 9.2x and 8.5x

respectively. Also the stock is available at 3x FY16E EV/ EBITDA and 2.1x FY17E EV/ EBITDA.

This suggests that the stock is quite attractively placed in terms of valuation and provides room

for substantial upside. There is no exact comparable peer of this company, as all other producers

of manganese ore are diversified in nature in terms of their product portfolio. We have gone

through valuation of some of these companies, including NMDC from India (though it does not

produce manganese ore). We feel MOIL is better positioned than most of these players because

of its scale of production with virtually no competitor, low cost- high margin structure and no debt

on books. Considering these, along with likely improvement in manganese ore demand due to

capacity addition by domestic steel companies, we believe the company is well poised for growth.

We value the stock taking an average of FY16E and FY17E EV/ EBITDA valuation. We apply

EV/ EBITDA multiple of 5.5x and 5x for FY16E and FY17E respectively. On this our fair value

stands at Rs 380. We initiate our coverage with a Buy rating. Any improvement in manganese

ore prices will offer further upside to our valuation.

Exhibit 20: Valuation table (Rs mn)

(Rs mn) FY16E FY17E

EBITDA 5,177 5,618

EV/EBITDA (x) 5.5 5

EV 28,471 28,088

Cash & Inv. 33,766 37,482

Debt - -

Market Cap 62,237 65,570

No. of Shares 168 168

Fair Value (Rs)* - 380

Source: Emkay Research;

*average of FY16E and FY17E

Exhibit 21: Peer Valuation

Mcap PER P/BV EV/EBITDA

Company (USD Bn) FY15E FY16E FY15E FY16E FY15E FY16E

Global

Vale 36.0 6.5 7.1 0.6 0.6 4.2 4.4

BHP Billiton 117.6 14.7 13.9 1.8 1.7 5.4 5.3

Eramet 2.5 N.A. 19.3 0.8 0.8 10.3 5.2

OM Holdings 0.2 N.A. 19.7 1.1 1.1 N.A. 10.0

Domestic

NMDC 9.1 8.2 7.3 1.7 1.5 4.5 4.2

GMDC 0.6 8.0 6.3 1.2 1.0 4.9 3.7

MOIL 0.8 10.0 9.2 1.4 1.3 3.9 3.0

Source: Bloomberg, Emkay Research

Exhibit 22: P/E Band

100150200250300350400450500550

Mar-

11

Jun-1

1

Sep-1

1

Dec-

11

Mar-

12

Jun-1

2

Sep-1

2

Dec-

12

Mar-

13

Jun-1

3

Sep-1

3

Dec-

13

Mar-

14

Jun-1

4

Sep-1

4

MOIL Price 12 10 8 6 16 Source: Bloomberg, Emkay Research

Exhibit 23: EV/EBITDA Band

-

10,000

20,000

30,000

40,000

50,000

60,000

Mar-

11

Jun-1

1

Sep-1

1

Dec-

11

Mar-

12

Jun-1

2

Sep-1

2

Dec-

12

Mar-

13

Jun-1

3

Sep-1

3

Dec-

13

Mar-

14

Jun-1

4

Sep-1

4

EV 10 8 6 4 2

Source: Bloomberg, Emkay Research



Annexure 1: Facts about Manganese (Mn) ore

MOIL Ltd is the largest manganese ore producing company in India and ranks fifth in the world.

In 1896, a British company by the name of Central Provinces Prospecting Syndicate was set up.

In 1924, it changed its name to the Central Provinces Manganese Ore Company Limited

(CPMO). Pursuant to an agreement between the Government of India (GoI) and CPMO, a

company in the name of Manganese Ore (India) Ltd was incorporated on June 22, 1962, with

51% capital held between the GoI and the State Governments of Maharashtra and Madhya

Pradesh and the balance 49% by CPMO. CPMO sold all its shareholding and certain other

properties and assets to GoI in 1977 and subsequently, GoI transferred all its assets to the

company and it became a 100% Government Company under the administrative control of the

Ministry of Steel. Finally in August 17, 2010 the name of the company was changed to MOIL Ltd.

The product portfolio of MOIL consists of manganese ore (1.1 mtpa capacity), high carbon ferro

manganese (HCFM, 10000 tpa capacity), electrolytic manganese dioxide (EMD, 1000 tpa

capacity) and wind power (20 MW capacity).

Exhibit 24: Grade specification

Grade Specification

High with >= 44% Mn content

Medium with > 30% and < 44% Mn content

Low with =< 30% Mn Content


Exhibit 25: Manganese ore industry and usage

Sl No. Grade of Ore Chemical Composition Specifications

1 Battery/Chemical MnO2 by mass (dry basis) 72% (Min)

Cu, Pb, Cr and Ni Trace

2 Ferromanganese Grade Mn 38% (Min)

Mn: Fe Ratio 2.5:1 (Min)

P 7:1(Max)

3 Blast Furnace Grade Mn 25 to (-)35%

P 0.2% (Max)

Al2O3 7.5% (Max)

SiO2 13% (Max)

4 Medium Grade Mn 35 to 37%




Exhibit 26: Application of manganese ore


MANGANESE ORE APPLICATIONS

Metallurgical

Ferrous Metallurgy Non-Ferrous Metallurgy

Aluminum based Alloys

Copper based Alloys

Electrolytic Zinc and Zinc Smelting

Non-Metallurgical

Iron and Steel Manganese Alloys

Dry Cell Glass Industry Ferrites

Chemical Industry

Ferromanganese Silico manganese

Manganese Metal 1. Potassium Permanganate

2. Hydroquinone

3. Manganese Sulphate

4. Manganese Oxide

5. Manganese Chloride

6. Maneb

7. Manganese Dioxide

8. Manganese Phosphate

9. Methylcyclo-pentadienyl manganese

tricarbonyl (MMT)

10. Other chemicals like welding flux



Annexure 2: India Manganese ore & Ferro Alloy scenario

Exhibit 27: Consumption of Manganese Ore in Different Industries

in KT FY09 FY10 FY11 FY12

All Industries 2,625.9 2,915.8 3,595.8 4,130.8

Ferroalloys 912 843 1,190.5 1,196.5

Silico manganese 1,546 1,919.7 2,235.9 2,661.1

Iron and Steel 148 134.6 151.2 255

Battery 17 14.9 14.6 14.6

Chemicals 2 1.6 1.6 1.6

Lead & Zinc Metallurgy 2 1.7 1.7 1.7

Alloy Steel 0 0.1 0.1 0.1

Others 0 0.4 0.2 0.2


Exhibit 28: Estimated Consumption of Manganese Ore in Ferro manganese and Silico manganese

In KT Prod of Ferro

mn

Est. consumption

of Mn ore Prod of silico

manganese

Est. consumption

of Mn ore

Total consumption

of Mn ore

FY01 170 408 276 497 905

FY02 207 496 236 424 920

FY03 237 568 304 548 1,116

FY04 248 596 380 685 1,281

FY05 270 649 498 896 1,545

FY06 273 655 565 1,016 1,672

FY07 297 712 738 1,329 2,041

FY08 391 939 911 1,641 2,579

FY09 386 927 936 1,685 2,612

FY10 356 855 1,116 2,009 2,864

FY11 404 970 1,299 2,338 3,308

FY12 447 1,072 1,478 2,661 3,733


Exhibit 29: Estimated Demand of Ferro Alloys as per the 12th 5 year plan

FY12 FY13 FY14 FY15 FY16 FY17

Ferro manganese

Domestic 456 515 577 640 698 769

Exports 80 88 97 107 118 130

Total 536 603 674 747 816 899

Silico manganese

Domestic 911 1034 1160 1292 1441 1583

Exports 350 385 424 488 561 645

Total 1,261 1,419 1,584 1,780 2,002 2,228

Total Manganese 1,797 2,022 2,258 2,527 2,818 3,127




Exhibit 30: Demand of Manganese Ore as per the XII Five Year Plan

In KT FY12 FY13 FY14 FY15E FY16E FY17E

Demand of FeMn 536 603 674 757 816 899

Demand of Mn ore for FeMn 1,286 1,447 1,618 1,793 1,958 2,158

Demand of SiMn 1,261 1,419 1,584 1,780 2,002 2,228

Demand of Mn ore for SiMn 2,270 2,554 2,851 3,204 3,604 4,010

Total 3,556 4,001 4,469 4,997 5,562 6,168

Req of FeMn slag 757 851 950 1,068 1,201 1,337

Avaibility of FeMn slag 482 543 607 673 735 809

Mn ore req for compensation of FeMn slag 275 308 343 395 466 528

Total req of Mn ore for Mn alloys 3,831 4,309 4,812 5,392 6,028 6,696

Req of Mn ore for other Industries 201 227 253 284 317 352

Grand Total 4,032 4,536 5,065 5,676 6,345 7,048


Exhibit 31: State wise production of Manganese ore


Madhya Pradesh 726 607 716 648

Maharashtra 681 614 673 650

Andhra Pradesh 185 261 291 322

Karnataka 333 301 413 136

Jharkhand 16 40 45 18

India 2,789 2,492 3,056 2,349


Exhibit 32: India’s Exports of Manganese Ore


Japan 22.5 31.5 - 0.1

China 157.0 251.1 78.3 71.1

Bhutan 22.8 6.9 19.2 3.0

All Countries 205.4 289.5 99.0 75.2


Exhibit 33: India’s Imports of Manganese Ore


Australia 348 220 364 568

Gabon 46 92 156 173

South Africa 360 360 579 936

Ivory cost 29 37 42 43

All Countries 852 728 1,300 1,961




Annexure 3: Manganese ore - Global scenario

Exhibit 34: Reserves in terms of metal content

Country Reserves (mn tonne) % of world total

South Africa 150.0 24.0

Ukraine 140.0 22.0

Brazil 110.0 17.0

Australia 97.0 15.0

India 49.0 8.0

China 44.0 7.0

Gabon 27.0 3.0

Others 13.0 2.0

Total 630.0 100.0


Exhibit 35: Production of manganese ore

Country Quantity % of world total

China 14.00 30.0

South Africa 8.65 18.0

Australia 6.96 15.0

Gabon 3.60 7.0

Brazil 2.60 6.0

India 2.39 5.0

Others 8.47 18.0

Total 46.67 100.0


Exhibit 36: Major global producers

Company

Resrerves

(mn tonne)

Grade

(%)

Annual production

(mn tonne)

Mn ore as

% of sales

BHP Billiton 267.6 37- 48 4.47 3.40

Assore/ Assmang 150.4 38- 45 3.14 60.00

Eramet 81.0 NA 2.00 48.00

Vale 73.9 37.9 1.70 0.01

MOIL 22.0 36- 39.9 1.13 86.0

ENRC 28.1 21.0 0.90 NA

OM Holdings 20.5 39.0 0.65 82.0

Source: RHP, Emkay Research



Key Financials (Consolidated)

Income Statement

Y/E Mar (Rs mn) FY13 FY14 FY15E FY16E FY17E

Net Sales 9,671 10,213 10,188 10,709 11,591

Expenditure 5,326 5,201 5,424 5,532 5,973

EBITDA 4,345 5,012 4,764 5,177 5,618

Depreciation 330 352 383 420 448

EBIT 4,015 4,660 4,381 4,756 5,169

Other Income 2,353 3,033 2,994 3,268 3,508

Interest expenses 0 0 0 0 0

PBT 6,368 7,693 7,376 8,024 8,677

Tax 2,051 2,598 2,454 2,648 2,864

Extraordinary Items 0 0 0 0 0

Minority Int./Income from Assoc. 0 0 0 0 0

Reported Net Income 4,317 5,096 4,922 5,376 5,814

Adjusted PAT 4,317 5,096 4,922 5,376 5,814

Balance Sheet


Equity share capital 1,680 1,680 1,680 1,680 1,680

Reserves & surplus 25,976 29,593 33,238 37,238 41,676

Net worth 27,656 31,273 34,918 38,918 43,356

Minority Interest 0 0 0 0 0

Loan Funds 0 0 0 0 0

Net deferred tax liability (154) (165) 21 21 21

Total Liabilities 27,502 31,108 34,938 38,939 43,377

Net block 2,335 2,325 2,342 2,422 2,374

Investment 42 42 42 42 42

Current Assets 28,548 31,498 34,124 37,553 41,525

Cash & bank balance 22,768 27,928 30,624 33,766 37,482

Other Current Assets 1,245 1,231 683 683 683

Current liabilities & Provision 3,693 3,445 3,388 3,696 3,982

Net current assets 24,855 28,053 30,736 33,856 37,543

Misc. exp 0 0 0 0 0

Total Assets 27,502 31,108 34,938 38,939 43,377

Cash Flow


PBT (Ex-Other income) (NI+Dep) 6,368 7,693 7,376 8,024 8,677

Other Non-Cash items 2 3 0 0 0

Chg in working cap (1,128) 1,963 199 21 30

Operating Cashflow 3,434 7,402 5,504 5,817 6,292

Capital expenditure (477) (763) (1,530) (1,300) (1,200)

Free Cash Flow 2,958 6,639 3,974 4,517 5,092

Investments 0 0 0 0 0

Other Investing Cash Flow 0 0 0 0 0

Investing Cashflow (477) (763) (1,530) (1,300) (1,200)

Equity Capital Raised 0 0 0 0 0

Loans Taken / (Repaid) 0 0 0 0 0

Dividend paid (incl tax) (1,074) (1,479) (1,278) (1,376) (1,376)

Other Financing Cash Flow 0 0 0 0 0

Financing Cashflow (1,074) (1,479) (1,278) (1,376) (1,376)

Net chg in cash 1,884 5,160 2,696 3,141 3,716

Opening cash position 20,884 22,768 27,928 30,624 33,766

Closing cash position 22,768 27,928 30,624 33,766 37,482



Key Ratios

Profitability (%) FY13 FY14 FY15E FY16E FY17E

EBITDA Margin 44.9 49.1 46.8 48.3 48.5

EBIT Margin 41.5 45.6 43.0 44.4 44.6

Effective Tax Rate 32.2 33.8 33.3 33.0 33.0

Net Margin 44.6 49.9 48.3 50.2 50.2

ROCE 24.6 26.3 22.3 21.7 21.1

ROE 16.6 17.3 14.9 14.6 14.1

RoIC 107.8 135.6 178.7 191.6 209.0

Per Share Data (Rs) FY13 FY14 FY15E FY16E FY17E

EPS 25.7 30.3 29.3 32.0 34.6

CEPS 27.7 32.4 31.6 34.5 37.3

BVPS 164.6 186.2 207.8 231.7 258.1

DPS 5.5 7.5 6.5 7.0 7.0

Valuations (x) FY13 FY14 FY15E FY16E FY17E

PER 11.4 9.7 10.0 9.2 8.5

P/CEPS 10.6 9.0 9.3 8.5 7.9

P/BV 1.8 1.6 1.4 1.3 1.1

EV / Sales 2.7 2.1 1.8 1.4 1.0

EV / EBITDA 6.1 4.3 3.9 3.0 2.1

Dividend Yield (%) 1.9 2.6 2.2 2.4 2.4

Gearing Ratio (x) FY13 FY14 FY15E FY16E FY17E

Net Debt/ Equity (0.8) (0.9) (0.9) (0.9) (0.9)

Net Debt/EBIDTA (5.2) (5.6) (6.4) (6.5) (6.7)

Working Cap Cycle (days) 78.8 4.4 4.0 3.1 1.9

Growth (%) FY13 FY14 FY15E FY16E FY17E

Revenue 7.5 5.6 (0.2) 5.1 8.2

EBITDA 0.3 15.3 (4.9) 8.7 8.5

EBIT (0.4) 16.1 (6.0) 8.6 8.7

PAT 5.1 18.0 (3.4) 9.2 8.1

Quarterly (Rs mn) Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Revenue 2,268 2,636 2,920 2,006 2,429

EBITDA 844 1,368 1,634 985 1,018

EBITDA Margin (%) 37.2 51.9 56.0 49.1 41.9

PAT 906 1,576 1,494 1,061 1,111

EPS (Rs) 5.4 9.4 8.9 6.3 6.6

Shareholding Pattern (%) Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

Promoters 80.0 80.0 80.0 80.0 80.0

FIIs 6.7 7.1 7.5 7.0 7.3

DIIs 2.9 2.9 2.8 2.6 2.6

Public 8.9 8.6 8.4 8.6 8.2



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