Hold Maharashtra Seamless; target of Rs 500: ICICI Direct

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ICICI Direct's research report on Maharashtra Seamless

Maharashtra Seamless reported steady operational numbers for Q4FY19. However, on the back of exceptional item relating to impairment of mining asset (worth ~Rs 146 crore), the company reported a loss at the net level. Standalone operations reported a topline of Rs 964.8 crore (up 52.8% YoY, 22.8% QoQ, higher than our estimate of Rs 879.1 crore). EBITDA came in at Rs 235.3 crore (up 89.3% YoY, 49.7% QoQ, higher than our estimate of Rs 163.6 crore). EBITDA margin came in at 24.4% (up 440 bps QoQ, 470 bps YoY, higher than our estimate of 18.6%). The company reported exceptional item relating to the impairment of mining asset (of ~Rs 146 crore). MSL had made an investment in a mining asset through its foreign subsidiaries .The subsidiary holding the mining investment has partly impaired the investment. Accordingly, the company & its other subsidiaries have also impaired their investment and loans provided. Hence, on account of exceptional item, the company reported a net loss of Rs 19.2 crore.

Outlook

Maharashtra Seamless reported healthy EBITDA margins during Q4FY19. However, going forward, we expect consolidated EBITDA margins to moderate to ~17.6% in FY20E and ~19.5% during FY2E (21.8% in FY19). We value the stock on an SoTP basis and arrive at a target price of Rs 500. We have a HOLD recommendation on the stock.

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