>MAHARASHTRA SEAMLESS (ICICI DIRECT)

Orders drying out…

Maharashtra Seamless (MSL) performance for Q1FY10 was above our estimates on higher sales realisation and lower input costs. The seamless pipes reported higher profitability for the quarter whereas ERW pipes performance was affected on account of pressure on the realisations. The top line grew at 20.1% YoY whereas the bottom line grew at 8.2% YoY on flat EBITDA margins (slightly downwards) and lower other income. The slowdown in the capex in the oil & gas sector has led to the decline in order book position to Rs 401 crore.

Highlights for the quarter
MSL reported 20.1% YoY growth in sales to Rs 422.5 crore in Q1FY10 on higher realisations of the seamless pipes segment. MSL reported an EBITDA of Rs 99.3 crore in Q1FY10 against Rs 83 crore in Q1FY09. The EBITDA margins declined ~10bps YoY to 23.5% in Q1FY10. The
net profit of MSL grew 8.2% YoY to Rs 65.2 crore in Q1FY10 as against Rs 60.3 crore in Q1FY09.

Valuations
The volatile crude oil prices have impacted the order-flow of tubular product companies like MSL. However, given the recovery in crude oil prices, order book of MSL would improve in quarters to come. The company trades at 3.2x FY11E EV/EBITDA. We rate the stock as a PERFORMER with a price target of Rs 296, 4x FY11E EV/EBITDA.

To see full report: MAHARASHTRA SEAMLESS