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NRI
NMDC Ltd>
  • CMP : 233.7 Chg : -7.06 (-2.93%)
  • 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
Q3FY23

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

Disclaimer

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RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts valuation for a stock

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Pankaj Pandey

Head – Research

pankaj.pandey@icicisecurities.com

 

 

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