MMTC LTD Stock

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2018 Mar 17

The objective of this paper is to analyze the value of the MMTC LTD stock (BSE: 513377, NSE: MMTC) and gather details regarding the stock, on an ongoing basis.

Disclaimer: This is not a Buy or Sell recommendation. These papers on stocks are for study and knowledge purpose. Please do your own research and if necessary take appropriate professional advice from your financial advisor before you invest in these stocks.

Section 1 : Business

1 . Give a brief overview of the company’s business activities.
2 . Give a brief description of the industry structure and the competitive position of the company.
3 . Give a SWOT (Strength, Weakness, Opportunities, Threat) analysis of the company
4 . List the major influencing factors (current or probable future) that could affect the earnings significantly with time range (when and how long), the direction (up or down) and the estimated quantum (%) of influence on the earnings, with reasons.

Section 2 : Earnings Forecast

1 . List down the Business scenario, assumptions and possible earnings forecast for the next quarter and year end.

Section 3 : Market: Value

1 . What is the estimated value of the business- Net cash flows expected to occur over the life of the business discounted at risk free interest rate / shareholders expected rate of return.

Section 4 : Technical Analysis:

1 . Stock price forecast – Give your forecast of the stock price over a period of 1 to 5 years next (please specify the year for your forecasted price) along with the reasons and assumptions for the prediction.

Section 5 : Major Events / news relating to the company:

1 . List the news with appropriate reference source.

Section 6 : Discussions

1 . Post your Questions here
2 . Post your responses to the Questions raised with appropriate references to identify the corresponding question

Business

MMTC Limited is the largest international trading company in India and has been in existence for almost five decades.

MMTC is the first Public Sector Enterprise to be accorded the status of "FIVE STAR EXPORT HOUSE" by Government of India for long standing contribution to exports.

MMTC continues as the canalized agency for export of Iron ore, Manganese ore & Chrome ore. MMTC is also one of the three canalizing agencies for import of urea. Presently, MMTC is one of the nominated agencies for import of gold and silver.

MMTC Limited continues to be a leader in mineral exports for over five decades now.

As a leading player in fertilizers and fertilizer raw material segment, MMTC has become a major fertilizer marketing company in India, through planned forward integration of its import activities with the direct marketing of Urea, DAP, MOP, Sulphur, Rock Phosphate, SSP etc.

MMTC is an authorized agency of the Government of India for import of gold, silver, platinum, palladium, rough diamonds, emeralds, rubies and other semi-precious stones and supply these items to traders & jewelers in India for domestic sales, processing and further exports. MMTC is the custodian for import & export of Precious cargo at SEEPZ, SEZ Mumbai.

MMTC has a medallion unit in New Delhi since 1996 for manufacturing its own brand of gold and silver medallions.

MMTC is one of India's largest seller of imported Non-ferrous metals viz. copper, aluminium, zinc, lead, tin and nickel. It also sells imported minor metals like magnesium, antimony, silicon and mercury, as also industrial raw materials like Ferro Alloys, Nobel Alloys and Minor Metals etc. MMTC imports quality products conforming to international specifications like ASTM or BSS or LME approved brands.

MMTC Limited is a global player in the Agro trade, with its comprehensive infrastructural expertise to handle Agro products. MMTC Limited provides full logistic support from procurement, quality control to guaranteed timely deliveries of agro products from different parts of India through a wide network of regional and port offices in India and its contacts abroad. The company's bulk handling of the agro commodities includes rice, wheat, pulses, onion, edible oil etc.

Its comprehensive infrastructure for bulk cargo handling, with well-developed arrangements for rail and road transportation, warehousing, port and shipping, operations, gives MMTC complete control over trade logistics, both for exports and imports.

Minerals:

MMTC Limited continues to play a leading role in mineral trade for a period spanning over five decades. 

MMTC has been consistently striving to enhance its competitiveness in the area of value addition. MMTC has provided further fillip to value addition of minerals.  MMTC’s  co-promoted 1.1. million tpa Neelachal Ispat Nigam Ltd. (NINL) consumes annually over 2.2 million tons of various types of minerals on annual basis arranged mainly by MMTC.

It continues to be one of the largest suppliers of Iron Ore, amounting to over 20% of India’s total iron ore exports during 2015-16. MMTC exports Iron ore/Chrome Ore/Chrome Concentrate/Manganese Ore to Japan, South Korea, China, etc. The export is both on the basis of long term arrangement and spot contracts.

Continuation of restrictions on Iron ore mining and its ban on movement for exports from Bellary-Hospet Sector, regulation of exports from Eastern Sector, uncompetitive FOB sale prices of Indian origin ore vis-à-vis other international suppliers i.e. Australia and Brazil (on account of export duty), subdued iron ore demand/prices in the international/ spot market, high iron ore inventory with Chinese steel mills, general slowdown of Chinese economy, relative prices increase in domestic demand of ore, etc. continued to have impact on the iron ore exports during 2016-17. Despite this and the stiff competition, MMTC continued to maintain its position as a prominent exporter of minerals. MMTC has established itself as a reliable supplier of iron ore to Japanese & South Korean markets over many decades and this portfolio will continue to bring steady business for it.

Reimposition of 30% ad valorem export duty on chrome ore/Chrome Concentrate from 26.05.2016 has resulted in limited export of Chrome ore/Chrome Concentrate from India. Moreover, increase in steel production/consumption in India would result in further demand of iron ore, Chrome ore and Manganese ore from domestic industry and may affect the availability of these products for export in future. Export of more ferro-chrome may adversely affect availability of chrome ore and also concentrates for export.

Precious Metals, Gems & Jewellery:

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 6% to 7% of the country’s GDP. It is one of the fastest growing sectors and is extremely export oriented and labour intensive.

MMTC enjoys the position of one of the market leaders in the Indian bullion trade. Despite high volatility in prices of bullion as well as Indian Rupee - US Dollar exchange rates, Precious Metals Group of MMTC contributed to approx. 50 percent of the total turnover achieved by the company in 2016-17.

MMTC’s  share stands at 2% for Gold and 10% for silver in the country’s bullion trade for 2016-17. MMTC is one of the nominated agencies for import of Bullion for supply to exporters as well as domestic traders/jewelers which is the basic raw material for Gems & Jewellery Industry of India. Being a nominated Body, MMTC plays a vital role in association with Govt. of India in Policy formulation to support Gems & Jewellery exports from India and development of Jewellery sector on Pan-India basis.

With increasing competition among the gold traders, there is a continuous decrease in the profit margin being experienced in the trade.

Gold demand in India is likely to remain below its 10-year average for a third year in 2018 as higher taxes and new transparency rules on purchases may cap last year's rebound in buying, as per the World Gold Council (WGC).

Metals and Industrial Raw materials:

MMTC’s strength lies in that its supplier base comprised of reputable international suppliers of all base and minor metals and linkages with major PSUs, Railways and Ordnance Factories to ensure steady stream of business. However, non-standardized and custom specified material are not available with empanelled suppliers. Procurement of imported NFM takes a minimum of 3-4 weeks’ time which becomes a bottleneck for serving the industry locally.

 The opportunities in NFM trade are expansion in minor metals and Ferro Alloys markets, sale of unpriced base Non Ferrous Metals or ex-Bond, SEZ or ex-FTWZ basis and expansion of supply base for import of NFM. The threats include increase in domestic production of secondary and recycled metals from indigenous and imported scrap and increase in domestic manufacture of base metals like Copper, Aluminium, Lead and Zinc creating an alternative supply source.

Agro Products:

Depending upon the domestic production, opportunities either for export or for import emerges. Very high volatility in some of the agro commodities is on the basis of price trend in international commodity market, and currency rate fluctuations pose a threat to agri business apart from natural vagaries like draught/monsoon etc. Globally, there has been slow down in all commodities markets right from crude oil, steel, agri commodities, edible oils, etc. Slow down of economic growth in China, EU and other countries have adversely affected the commodities markets. The group is no exception to this development.

Fertilizers and Chemicals:

MMTC Limited is one of the major importers of fertilizers in India. Fertilizer industry in India has been passing through tough phase in recent years. The outlook for 2018-19 for India will depend on the monsoon and the Government policy.

Coal and Hydrocarbons:

Power Utilities, the major consumers of non-coking coal have drastically reduced consumption of imported coal in view of the increase in domestic production & dispatch from pit head to power plant. However, the plants located at coastal regions or thermal plants whose boilers are designed for imported coal would continue to import. In view of the increase in domestic production & improved supplies, imports may witness stagnation.

Currently there is big gap between demand and supplies of coking coal in the domestic market, which is likely to widen further. MMTC imported coking coke on a regular basis for its JV Company - Neelachal Ispat Nigam Limited, Duburi, Orissa.

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Earnings Forecast

As per the workings attached the Q4 profit comes to around Rs. 22.89 crores and the yearly profit comes to around Rs. 58.91crores.

References :

http://mmtclimited.com/pages/display/55-corporate-profile

MMTC Annual Report 2016-17