Monarch Networth Capital - Kirloskar Ferrous Industries Ltd (KFIL) – Commissions first captive iron ore mine but Conditions apply
Mcap: Rs 22bn | Rating: BUY | TP: Rs190 | CMP: Rs160 | Upside: 19%
~Commissions mining at BMM mine: KFIL has commissioned their captive iron ore mine – BMM in Karnataka on 24th March 2021 which has EC clearance to mine 0.7mtpa and was won at a very low premium of 55.5%.
~Forest Clearance for BMM mine to expire on 5th April 2021: KFIL has already applied for renewal of FC for BMM Mine which should be approved anytime in 1QFY22. Despite disruption, KFIL mgmt. is confident of achieving the 1.2lakh tpa guidance of iron ore mining from BMM in FY22E.
~VSL steel pig iron plant starts prod. in 4QFY21: We expect 15-20kt pig iron sales from the new VSL steel pig iron plant commissioned in Feb’21.
~Our view: With on time commissioning of BMM mine and second mine expected to be commissioned late 1QFY22/ early 2QFY22, we expect no change in our estimates of captive iron ore sourcing for FY22E/FY23E which would result in savings of Rs250mn/330mn respectively. As the strong momentum in casting sales continues, we expect company to clock Rs1.65-1.7bn EBITDA in Q4FY21E backed by price hikes for casting and pig iron.
Regards,
Sahil Sanghvi @ Monarch Networth Capital Ltd.