I have exited Man Ind post-Q2 call. Sharing the summary here but take a bit of negative bias:
- This Q2 Revenue Breakup: 75% O&G, 25% Water and 80% Exports. Have OB of 1400 Cr. as of “Today” of which 60% is export. This OB you can say will be delivered within FY24. On top, we can do some sales from the ERW plant as well in Q4.
- Margins were lower due to Forex Gain of Rs. 19 Cr. which is shown in other income. If you adjust this, margins have not fallen much. (Not sure what management is thinking, or it was an escape to justify this margin fall)
- Interest cost belonging to loan taken for the ERW plant, will remain till the time ERW revenue does not come. Hence, till that time expect to remain at this level.
- Inventory is high because of back-to-back RM booking and pending export orders. Once Export orders get delivered, you can see a drop in inventory in Q3.
- SS Seamless Plant is on track.
- Guidance for EBITDA in H2 will be at 10%.
- Merino Shelter, you can assume money will be received in one month.
My assessment after the call: I was expecting pretty good revenue but margins as well. O&G as well as Exports have better margins v/s Domestic and Water. Almost 75-80% of revenue in Q2 belonged to export/O&G. Despite this margins fell too much. In the call, was particularly disappointed with management giving and escape of Forex Gain. I have been following this stock for a long and I knew management guidance and integrity have always been an issue, and at this price, I felt the margin of safety is reducing. Alternatively, I have other opportunities at better valuations.
Hence, decided to exit the stock and book in profit with my average cost being 140-around.
Regards,
Mukul Jain
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