Stock Review: Sandur Manganese and Iron Ore

Company Loses 18% In Less Than 2 Weeks After Soaring 80%; Stock May Surge In Run-Up To MOIL Listing

   SHARES of Sandur Manganese and Iron Ore fell for the fifth consecutive session, shedding around 3% to close at 824.50. The stock had risen 80% during the November 1-11 period, as investors bought heavily on the assumption that Sandur was undervalued compared with its closest peer, the initial public offering bound Manganese Ore India. Karnataka-based Sandur is the second largest player in the manganese sector after MOIL and had accounted for 10% of the total manganese production in the country last year.

   With the broader market under pressure, Sandur shares have fallen sharply, and brokers attribute the trend largely to squaring up of speculative positions. With Tuesday's fall, the stock is down around 18% from its record high of 1,010 in less than two weeks.

   Still, brokers feel that the stock has some steam left and could surge closer to the listing of the MOIL shares in about two weeks. They say that some fund houses and high net worth individuals have been accumulating the stock over the past month.

   Many investors have taken a fancy to the stock, as it is the only other company apart from MOIL that gets a significant chunk of its revenues from manganese ore.

   Sandur earned 40% of its revenues from its manganese ore business in the financial year 2009-10, and 54% from iron ore. Among other listed mineral development companies, OMDC earned barely 4% from manganese.

   For Sandur, sales realisation from manganese ore was . 4,273 per tonne against . 1,010 per tonne for iron ore, according to data provided by Capitaline. The realisation from manganese increased from . 1,709.82 per tonne in FY05 to a peak of . 7,232 per tonne in FY09 due to a surge in manganese prices.

   The company clocked an earnings per share of . 53.6 for the first half of the current financial year, 93% higher than the EPS of . 33 for the whole of past financial year.

   This was largely driven by a strong performance for the July-September quarter, with net profit surging 131% year-on-year to . 18.16 crore. However, the bottomline growth was boosted by a reduction in expenditure rather than a robust topline growth. Quarterly revenues grew 10% to . 75.32 crore, while total expenditure fell 16% to . 49.31 crore.