Hold Maharashtra Seamless; target of Rs 265: ICICI Direct

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ICICI Direct's research report on Maharashtra Seamless

Maharashtra Seamless (MSL) reported an operationally steady performance for Q1FY21 wherein the company was able to maintain its EBITDA margins despite a challenging market scenario. Consolidated topline for the quarter was at Rs 459 crore (down 34% YoY, 22% QoQ). Seamless pipe sales volume for the quarter was at 44900 tonnes (down 36% YoY, 34% QoQ). Similarly, ERW volumes for the quarter were at 13184 tonnes (down 18% both QoQ as well as YoY). On a consolidated basis, the company reported an EBITDA margin of 22.0% (compared to 22.2% in Q1FY20, 17.7% in Q4FY20). Consolidated EBITDA was at Rs 101 crore (down 3% QoQ, 35% YoY). For the consolidated operations, for the quarter, depreciation expense were at Rs 29 crore (up 4% QoQ, 45% YoY), finance cost was at Rs 16 crore (up 13% QoQ but down 12% YoY) while other income was at Rs 17 crore (down 10% YoY). Ensuing consolidated PAT for the period was at Rs 45 crore (down 41% YoY).

Outlook

For Q1FY21, MSL reported an operationally steady performance. For the quarter, consolidated EBITDA margins were at 22.0% (22.2% in Q1FY20 and 17.7% in Q4FY20). Going forward, we model consolidated operating margins of 19.7% for FY21E and 20.6% for FY22E. We value the stock at 5x FY22E EV/EBITDA and arrive at a target price of Rs 265. We maintain our HOLD rating on the stock.

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