Sandur Manganese & Iron Ores Ltd Q1 FY22 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 2
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 2- Revenue outlook for FY22 is expected between ₹1,700 to ₹2,000 crores (Page 23).
- Iron ore production capacity increase from 1.6 to 3.5 million tonnes is in the final approval stages, expected by end of the calendar year (Pages 22-24).
- Company expects better revenue, potentially above ₹1,200-1,300 crores in coming periods (Page 24).
- Ferroalloys revenue at current capacity can reach around ₹300 crores with 20% EBITDA margin; utilization expected to improve given high prices (Pages 16-17).
- Coke production ramp-up: operating close to full capacity, further growth dependent on coal prices (Page 17).
- Steel plant expansion planned in phases—0.4 to 1 million tonnes capacity—with CAPEX phased and finalized after product choice, with announcements expected during the calendar year (Pages 12-22).
- Overall, phased capacity increases and forward integration are geared towards sustainable volume and revenue growth.
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Fundraise plans
Yes- The company plans to fund its upcoming expansion largely through internal accruals, leveraging healthy cash flows expected from scaling up iron ore output to enhanced limits.
- For the steel plant CAPEX estimated around Rs. 2,000-3,000 crores, a mix of debt and equity funding is envisaged.
- Management aims to maintain a safe debt-to-equity ratio around 1:1 (50% debt, 50% equity), avoiding excessive financial burden.
- There is consideration for private equity funding and potential dilution after a share split and NSE listing to support larger capital needs.
- Existing share pledges were primarily for past CAPEX but are expected to be released soon due to improved financial strength.
- No firm debt or equity fundraising announcement yet; plans and timing to be announced in due course.
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Capex plans
Yes- The company has recently commissioned Phase 1 of its CAPEX plan, including a 0.4 MTPA Coke Oven plant and 30 MW power generation via Waste Heat Recovery Boilers (completed January 2021).
- Phase 2 CAPEX involves forward integration into steel making with an envisaged capacity of 0.5 to 1 million tonnes per annum, expected to cost Rs. 2000-3000 crore, to be done in phases.
- Expansion of iron ore mining capacity from 1.6 million tonnes to approximately 3.8 million tonnes is in final approval stages, expected by end of the calendar year.
- Plans include setting up an iron ore beneficiation plant and pellet plant to improve ore quality and market value.
- Ferroalloys capacity may increase from 48,000 TPA to around 70,000-72,000 TPA subject to power availability.
- The company intends to fund expansion mainly via internal accruals with a mix of debt and equity; aiming for a maximum debt-equity ratio of 1:1.
- Formal announcements on timelines and total investments are expected within the calendar year.
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Margin guidance
Category 3- Revenue guidance for FY22 is optimistic, expecting ₹1,700-2,000 crores with potential to exceed ₹1,200-1,300 crores earlier estimated.
- Expansion plans include increasing iron ore mining capacity from 1.6 to 3.85 million tonnes soon after EC approval expected by year's end, with quick ramp-up.
- Forward integration into steelmaking and value-added products like pellets to improve product quality and margins over time.
- CAPEX for steel plant and beneficiation facilities is planned in phased manner, estimated between ₹2,000-3,000 crores. Funding primarily from internal accruals with some debt (D/E ~1:1).
- Ferroalloy business showing good utilization and pricing, with potential 20%+ EBITDA margin and revenues around ₹300 crores at full capacity.
- Coke plant margins are good, but coal price volatility creates some uncertainty in longer-term profitability.
- Company aims to maintain regular investor communication and progressively grow earnings aligned with operational expansion and market conditions.
Order book
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