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Monnet ISPAT AND Energy

October 17, 2007

Monnet Ispat and Energy’s (MIEL) Q2FY08 results were better than expectations due to greater-than-anticipated increase in ferro alloy sales volume and realisation. Sales volume of ferro alloys increased 70% Y-o-Y and 10% Q-o-Q. Net revenue, EBITDA, and net profit grew 92%, 45%, and 36% Y-o-Y, respectively, led by higher sales volume in sponge iron and ferro alloys and improved sales realizations across all products (sponge iron, steel, and ferro alloys).

Key disappointments were in terms of: (i) lower-than-expected sponge iron production, which at 118,081 MT was 14% below our expectation; and (ii) the second captive power plant not commencing in September 2007.

At CMP of INR 390, the stock is trading at an EV/EBITDA of 8.0x FY08E and 5.6x FY09E, and P/E of 9.5x FY08E [Rs 41 EPS] and 6.8x FY09E [Rs 57 EPS] on a fully diluted basis.

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