Sandur Manganese to lifetime high

Sandur Manganese and Iron Ores scrip jumped 5% to Rs 1185.65 on sustained buying after the company’s management guided a whopping 10-fold jump in net profit for the year ending March 2009, on 13 May 2008.

The stock hit a high of Rs 1185.65, a lifetime high for the stock on BSE. The stock’s intra-day low so far during the day is at Rs 1147. The stock touched a 52-week low of Rs 30.05 on 24 March 2008.

The company’s paid up equity share capital is Rs 8.75 crore, with face value per share being Rs 10.

A relatively unknown stock Sandur Manganese and Iron Ores, currently traded in BSE’s Z group, suddenly hogged limelight after the company’s management on 13 May 2008, issued a guidance of around 344% jump in net sales to Rs 1200 crore in the year ending March 2009 (FY 2009) and around 939.32% surge in net profit to Rs 600 crore in FY 2009, if manganese ore prices continued to rise.

The company further said that Rs 300 crore to the net profit will be contributed from manganese ore, even though it forms only 15% of the company’s total production.

The stock galloped 55% in just nine trading days to Rs 1129.20 on 26 May 2008 from its close of Rs 728.05 on 12 May 2008. The stock was consistently locked at 5% upper circuit filter in all those nine sessions, boosted by management’s bullish guidance.

At the current market price of Rs 1185.65, the Sandur Manganese and Iron Ores stock is trading at a PE multiple of 17.97 based on its FY 2008 (year ended March 2008) EPS of Rs 65.96 and a forward PE multiple of a mere 1.73 based on its FY 2009 EPS of around Rs 685.

With spiraling commodity prices, investor fancy turned towards the Sandur Manganese and Iron Ores stock, anticipating that scarce manganese ore will bolster revenues of the company. Globally, prices of manganese ore have risen sharply in the last 12 months.

A majority 74.80% shares of the company are held by promoters. Public and institutional holding on the counter is 15.65% and 8.03% respectively as at end March 2008. Non-promoter corporate holding at 1.53% forms the rest of company’s equity structure. Interestingly all the company’s shares are currently traded in physical format.

Sandur Manganese and Iron Ores derives its revenues from two sources - Manganese ore and iron ore. The company mines about 2 million tonnes of which around 1.7 tonnes (or 85%) is iron ore, while manganese ore is only 0.3 tonnes (15%) of total production. Manganese ore is consumed by the ferro-alloy industry in India. The company exports close to 60% of its production to China and Japan.

The company reported turnaround results in the Q4 March 2008 reporting net profit of Rs 38.39 crore as compared to net loss of Rs 53.94 crore in Q4 March 2007. Net sales jumped 107.4% to Rs 111.96 crore in Q4 March 2008 over Q4 March 2007.