Mechel (MTL) P/E Ratio 9 for 100% Income Growth - Trader Mark

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Mechel (MTL) P/E Ratio 9 for 100% Income Growth
Jul 15, 2008 01:50 AM UTC

Trader Mark

Return	Risk
-7.06%	MID

Analyst

Profile & Performance

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Symbol	Sentiment	Start	Return	Closed
MTL		07/15/08	-14.32%	07/18/08

Via Fund my Mutual Fund:

You just have to love this Mechel (MTL) - valued below some US Financials. Their earnings pattern is beyond me - they just reported in late May so why we already have another earnings report - maybe its that metric system ;) I won't retype the whole thing but for those interested here is the earnings report and some key takeaways below; again I don't really focus on the quarter to quarter earnings with some subsets of the portfolio - if they "missed" by 2 cents or "beat" by 4 cents it really is immaterial to the story. Surely we could ask for say a 12 forward P/E ratio, Mr. Market?

Net revenue in the first quarter of 2008 rose by 64.1% to $2.3 billion from $1.4 billion in the first quarter of 2007. Operating income rose by 112.3% to $642.1 million, or 27.58% of net revenue, in the first quarter of 2008, compared to operating income of $302.5 million, or 21.32% of net revenue, in the first quarter of 2007.
Mechel reported consolidated net income of $500 million, or $1.20 per ADR / diluted share, an increase of 162.2% over consolidated net income of $190.7 million, or $0.46 per ADR / diluted share, in the first quarter of 2007.

They continue to move steel to a smaller part of their overall business (which I like since I could see some risks there as I've outlined in the past) and it is now down to 55% of revenue, down significantly from 65% last quarter. Mining, as percent of revenues, is up 7% from 30% last quarter to 37% this quarter. Power business remains at 8% of business but with the overall revenue stream growing so fast, this indicates a lot of growth here as well. (up from 1% of revenues a year ago). Simply a nice one stop "shop" in 1 stock for many of the areas we want to be deployed into.

The stock is finally showing some relative strength in the $46s, and once it breaks north of the 50 day moving average of $49 it should put on a typical Mechel run in the ensuing months. I added a touch today (early in the AM - did not realize earnings were coming out today) to get us back to 1.5% of portfolio after seeing how pathetic it's forward P/E ratio was.

[Jun 19: Mechel Could Raise $2 Billion in Private Placement Offering]
[May 29: Mechel Earnings]
[Apr 9: Mechel Continues to Acquire Most of Eastern Europe]
[Dec 12: Mechel Reports Earnings, Considers Mining IPO]
[Nov 5: Two New Foreign Positions Added Today]

Long Mechel in fund; no personal position

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