Maithan Alloys Ltd. share price target

Co produces ~1% of total global Mn alloy supply, which means there is little offtake risk. This, coupled with the fact that Maithan is amongst the lowest cost producers in the world, makes them amongst the last men standing in case of any global commodity downturn, esp steel. It is also noteworthy that China discourages export of Mn alloys (seen as energy intensive). We initiate coverage on Maithan Alloys with a BUY rating and a TP of Rs 900 (base case) based on conservative assumptions. Our upside (and downside) cases yield TPs of Rs 1,500 (and 375). Maithan Alloys is Indias largest producer & exporter of Mn Alloys with over two decades of experience. Manganese alloys are critical for steel manufacturing translating into a large globally addressable market for Maithan. Cos customers include marquee domestic/global steel majors, with most of them being repeat customers.

We recently met the management of Maithan Alloys (MAL) to understand its business model and long term prospects. The company was incorporated in 1985 while production commenced in 1997. MAL is a leading manufacturer and exporter of niche value added manganese alloys such as ferro manganese, silico manganese and ferro silicon largely used in manufacturing steel. The company has an installed capacity of 137.25 MVA as on March 31, 2017 spread across three locations at Kalyaneshwari, Vishakhapatnam and Byrnihat. The company also...