Monnet Ispat & Energy records 23% y-o-y revenue growth in June quarter; input costs squeezes EBIDTA margins

MUMBAI: Better utilisation rate and higher realisations led to a 23% year-on-year growth of revenues in June 2012 quarter for Monnet Ispat & Energy Limited. However, rising input costs, primarily iron ore, squeezed the EBIDTA margins by 138 basis points against a year ago.

Many small players have stopped production in the last quarters in the event of rising raw material prices. This provided an opportunity for the company to operate at an utilisation rate of 95% in the last quarter.

The rising steel and sponge iron prices increased realisations which were 16% higher as compared to last year. However, the proceeds from the power division declined to Rs 2.9 from Rs 3.4 per unit a year ago and this led to sequential fall in blended realisations by 5%. The power division currently contributes 23% to the topline.

The company is due to commence its 1.5 million ton per annum at Naharpali, Chhattisgarh in the second quarter of FY 12. With an intention to become an integrated steel plant, it is making provisions to satisfy its raw material requirements captively.

While the iron ore mine is operational, the commissioning of the iron ore and coking coal mines is still uncertain and will not be before the latter half of FY 14 as necessary approvals are pending. Moreover, the cyclical nature of the industry and the global steel pricing makes it dependant on external factors to a great extent as well.

It currently trades at a low PE of 6.2 as against the industry average of 15.14. It has fallen by 37% in last six years on the back of uncertainty prevailing in the steel sector. Going ahead, clearance of all the regulatory hurdles will be a big boost to the company.