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Man Industries - Revenue in line, adj. PAT beats estimates

For Q3FY09, Man industries reported a 10.4% YoY and a 21.3% QoQ increase in topline to Rs 4.5bn, in line with our estimates. Average realisations increased by 45.6% YoY and 11% QoQ to Rs 67,139.
LSAW and HSAW segment average realisations increased YoY by 24% and 63% to Rs 66,433 and Rs 67,269, respectively. Volumes declined a sharp 27% YoY to 67,281 tonnes. The LSAW volumes declined 23% YoY to 27,563 tonnes and HSAW volumes declined by 30% to 39,718 tonnes.
Sequentially, however, volumes were up 10.3%.
During the quarter, the company’s EBITDA/tonne increased 35.3% YoY and 24% QoQ to Rs
7,104/tonne. EBITDA margin expanded 119bps QoQ to 10.5%. Although adjusted PAT was down
12.1% YoY to Rs 182mn, it was 31.7% ahead of our estimates. PAT has been adjusted for a forex loss of Rs 213mn during the quarter.
The company won about Rs 3.2bn worth of orders in Q3FY09, compared to orders aggregating about Rs 11.8bn in the previous quarter. At end-December 2008, the order-book stood at Rs 13.5bn (about 210,000 of pipes), which is 0.87x its TTM sales.Man Industries decided to buy-back US$ 50mn FCCBs, which were issued in May 2007 and are redeemable in May 2012.
The stock is currently trading at a P/E of 3x and 2.7x FY09E and FY10E earnings, respectively. In light of the slower growth in order book, we maintain our Reduce rating on the stock. We are also
maintaining our FY09E and FY10E estimates, but are lowering our target price from Rs 42 to Rs 34. At our target price, the stock will trade at 3x FY10E earnings.

To see full report: Market Insight 5-02-2009