Anand Rathi Share and Stock Brokers Limited (ARSSBL) has initiated coverage on MOIL Ltd., India's largest manganese ore producer, with a ‘Buy’ rating and a 12-month target price of Rs 400. MOIL dominates the Indian manganese market with a ~20% market share domestically and 2.2% globally, and it is poised for significant growth. The company plans to expand its mining capacity from 2.49 million tonnes to 5 million tonnes by FY30, increasing its domestic market share to 32%. With a strong financial position, aggressive expansion plans, and increasing demand from the steel industry, MOIL is expected to deliver >19% CAGR in revenue and >32% CAGR in EBITDA from FY24 to FY27.

MOIL’s Market Leadership and Growth Strategy

MOIL holds a dominant position in India's manganese mining sector, operating ten mines across Maharashtra and Madhya Pradesh. The company is aggressively expanding its mining capacity and has set a target to produce 3.5 million tonnes of manganese ore by FY30.

MOIL’s key strength lies in its high-quality ore and strategic mine locations, ensuring supply to major steel producers in central India.
The company's ongoing environmental clearance (EC) expansion will increase its production capacity, reducing India's dependence on imported manganese.

Financial Performance and Growth Projections

MOIL has demonstrated consistent financial performance and is expected to witness robust growth in the coming years.

Financial Forecast (FY23 - FY27)

Revenue CAGR of >19% expected between FY24-FY27, driven by increased mining output and higher manganese prices.
EBITDA CAGR projected at >32%, showcasing strong profitability expansion.
Stock valuation remains attractive with a declining P/E ratio from 25x in FY23 to 8.8x in FY27, indicating higher earnings potential.

Expansion Plans and Capital Expenditure

MOIL is investing Rs 24 billion in capital expenditure (Capex) until FY30 to scale its operations and modernize mining infrastructure.

The company’s brownfield expansion will increase production volumes from 1.8 million tonnes to 3 million tonnes by FY30.
Greenfield projects and joint ventures (JVs) will add another 0.5 million tonnes, taking total capacity to 3.5 million tonnes.
Shaft-sinking projects at Balaghat and Gumgaon mines will boost underground mining efficiency and volume growth.

Impact of Manganese Price Trends

Manganese prices have witnessed significant volatility due to supply chain disruptions and increasing global demand for steel.

International manganese prices have surged 11-13% month-over-month, reaching a four-month high.
MOIL has already raised product prices by 4-8% for February 2025 deliveries, capitalizing on the price upswing.
Continued demand from the steel industry is expected to keep manganese prices elevated, benefiting MOIL’s margins.

Stock Performance and Valuation

Stock Key Data

MOIL stock is currently trading at Rs 304, with a 12-month target price of Rs 400, indicating a potential upside of 32%.
Debt-free balance sheet and high dividend payout track record add further investment appeal.
Strategic expansion and demand growth from the steel sector support strong fundamentals.

Key Risks

Despite MOIL’s strong growth potential, certain risks remain:

Regulatory Delays: Environmental clearances (EC) are crucial for production expansion.
Manganese Price Fluctuations: International price volatility can impact revenue and margins.
Logistics and Cost Challenges: Rising transport and operational costs may affect profitability.

Conclusion: Strong Investment Case with Upside Potential

MOIL is well-positioned to benefit from India's rising steel production, backed by its dominant market share, expansion strategy, and financial strength. The stock presents a compelling investment opportunity with an attractive valuation, strong earnings growth, and strategic capital expenditure plans. With a 32% upside potential, MOIL remains a top pick in the metals and mining sector.

Investors should, however, conduct their own due diligence before making any investment decisions.