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ONGC order gives revenue visibility to Maha Seamless


Date: 05-12-2018
Subject: ONGC order gives revenue visibility to Maha Seamless
Mumbai: Maharashtra Seamless, which bagged an equipment-supplies order worth Rs 920 crore from ONGC, should benefit from increasing demand from a customer-segment in which it enjoys a market share of 35-40 per cent. 

Maharashtra Seamless has received the order from ONGC for supplying seamless casings, tubings, line pipes and ERW pipes from India’s premier national oil company. The stock, which declined 3 per cent so far this year, ended at Rs 492 on Tuesday. 

"This order improves the visibility for achieving our revenue and profit estimates of Rs 2,970 crore and Rs 380 crore, respectively, for this year,” said Shailee Parekh, analyst, Prabhudas Lilladher. “The stock currently trades at 8.7x and 6.5x FY 2019 and FY 2020 EPS estimates of Rs 56.7 and Rs 75.6, respectively.” 

Parekh maintains a buy on the stock, with a target price of Rs 597. 

Analysts expect revenues to grow at a CAGR of 31.9 per cent and profits by 58.7 per cent in FY 2020 on the back of strong volume growth and rising EBITDA. 

“The company’s pipes production, going forward, will get a boost from the ramping up of the 200 KT Mangaon Plant to its full capacity by FY 2019 and further by 350 KT Nagothane plant, which is expected to reach full capacity by December 2018,” said Dewang Sanghavi, analyst, ICICI Securities. “On the demand for pipes overall, we remain positive given the investments lined up by the government in key consuming sectors like oil and gas and city gas distribution.” 

MSL is almost debt-free and has healthy cash flow from its operations for availing working capital facilities. MSL has a healthy order book of Rs 1,870 crore as on date and has restarted the Mangaon Seamless Pipes facility in Q3 FY 2018. It emerged as the highest bidder for United Seamless Tubulaar, which has a capacity of 350,000 tonnes of seamless pipes for Rs 477 crore and is expected to be completed by the end of FY 2019. 

“We estimate the top-line of the company to grow more in this fiscal on the back of higher realizations and restarting of the idle plant at Mangaon,” said Anmol Das, analyst, Stewart & Mackertich Wealth Management. “Hence, on the back of improving ROCE, we assign an EV/EBITDA of 7.5 times FY 2020 and arrive at a target price of Rs 647.” 

Source: economictimes.indiatimes.com