For Q4FY08, net sales increased 34.6% y-o-y to Rs4.1 billion. However, EBITDA decreased 8% y-o-y to Rs390 million as its new HSAW mill witnessed lower yields. EBITDA margins dipped 440 bps to 9.5% due to an increase in raw material costs. Adjusted PAT increased by 4.5% y-o-y to Rs142 million.
We have revised our FY09 and FY10 net sales estimates downwards by 9.6% and 15.9% to factor in a decline in the order book. Volume estimate have also been revised downwards because of a lower order intake in FY08 (fresh order of Rs2.8bn against net sales of Rs15 billion in FY08).
Despite the net reduction in the order book in FY08, we remain bullish on the prospects of the SAW pipe industry as a whole, and MAN Industries in particular, because of continued robust investments in creating oil and gas pipeline networks.
The stock currently trades at 7.1x 1-year forward diluted earnings. Based on the analysis, target price is revised downwards from Rs120 to Rs90 to reflect the downward revision to our earnings estimate. We downgrade our rating on the stock from Accumulate to HOLD.