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  • CMP : 265.3 Chg : 2.20 (0.84%)
  • Target : 140.0 (18.64%)
  • Target Period : 12-18 Month

16 Feb 2023

Steady operational performance…

About The Stock

Incorporated in 1958, NMDC is Indias largest merchant iron ore miner.

  • During FY22, NMDC’s iron ore production volume was at ~42 million tonne (MT) while sales volume for FY22 was at ~41 MT
  • NMDC is one of the lowest cost iron ore producers in the world

NMDC reported a steady operational performance in Q3FY23.

  • For Q3FY23, NMDC reported sales volumes of 9.6 million tonnes (MT), up 14% QoQ but down 2% YoY, broadly in line with our estimate of 9.6 MT. Iron ore sales realisation for the quarter was at ₹ 3821/tonne, down 35% YoY and 2% QoQ (our estimate of ₹ 3800/tonne). EBITDA/tonne for the quarter was at ₹ 1193/tonne, up 18% QoQ but down 55% YoY (our estimate of ₹ 1250/tonne)


  • For the quarter, NMDC’s standalone revenue from operations was at ₹ 3720 crore, up 12% QoQ but down 37% YoY, broadly in line with our estimate of ₹ 3704 crore


  • Standalone EBITDA for the quarter was at ₹ 1143 crore, up 34% QoQ but down 56% YoY (our estimate of ₹ 1203 crore). EBITDA margin for the quarter was at 30.7% against our estimate of 32.5% (EBITDA margin of 44.5% in Q3FY22 and 25.7% in Q2FY23)


  • Ensuing standalone PAT for the quarter was at ₹ 890 crore, flattish QoQ (our estimate of ₹ 941 crore). Consolidated PAT for the quarter was at ₹ 904 crore, up 2% QoQ
What should Investors do?

NMDC’s share price has given a return of ~15% in the last one year (from ~₹ 103 in February 2022 to ~₹ 118 levels in February 2023).

  • We maintain our BUY rating on the stock
Target Price and Valuation

We value NMDC at ₹ 140, 5x FY24E EV/EBITDA.

Key Triggers for future price performance
  • For FY24E, the company has given a production target of 50 MT. In the medium-term, NMDC is targeting capacity enhancement to 70-75 MT
  • Going forward, for FY23E, we expect an EBITDA margin of 34.3% while for FY24E we expect EBITDA margin at 35.5%
Alternate Stock Idea

In our metal sector coverage, we also like Jindal Stainless.

  • Jindal Stainless (JSL) has a 1.1 million tonnes per annum (MTPA) integrated stainless steel facility at Jajpur, Odisha
  • BUY with a target price of ₹ 300

Key Financial Summary

(| Crore) FY19 FY20 FY21 FY22 CAGR(FY17-FY22 in %) FY23E FY24E CAGR(FY22-FY24E in %)
Net Sales 12,152.7 11,699.2 15,370.1 25,964.8 24.1 16,325.3 19,247.6 -13.9
EBITDA 6,930.0 6,010.4 8,795.9 12,630.9 28.5 5,601.0 6,826.9 -26.5
EBITDA Margin (%) 57.0 51.4 57.2 48.6 - 34.3 35.5 -
Adj PAT 4,642.5 3,610.9 6,252.7 9,448.3 29.6 4,382.0 5,195.8 -25.8
EPS (|) 15.2 11.8 21.3 32.2 - 15.0 17.7 -
EV/EBITDA (x) 4.8 5.9 3.5 2.3 - 5.2 4.1 -
RoCE (%) 25.3 20.3 27.0 62.6 - 24.2 26.5 -
RoE (%) 17.9 13.1 21.0 52.7 - 22.0 23.1 -
Source: Company, ICICI Direct Research



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