Hold NMDC; target of Rs 122: Edelweiss
Edelweiss recommended hold rating on NMDC with a target price of Rs 122 in its research report dated August 09, 2017.
Edelweiss' research report on NMDC
NMDC’s Q1FY18 EBITDA of INR14.9bn surpassed consensus due to slightly higher volume and lower other expenses. Going forward, despite the silver lining on volume, we perceive multiple headwinds due to: 1) price cut of INR200/t in July; 2) domestic competition from Odisha miners; and 3) constraints on cash flow accretion due to pending capex. Taking cognizance of lower other expenses, we revise up FY18/FY19E EBITDA 1% each. At CMP, the stock is trading at 8.0x FY19E EBITDA, which is at the top bracket of its 5-years’ trading range. Maintain ’HOLD’ with revised TP of INR122 (INR120 earlier).Outlook
Taking into account lower other expenses, we have revised our FY18/FY19E EBITDA up 1% each. However, we expect headwinds from limitation to increase prices due to high competitive intensity and differential pricing in Karnataka coming under pressure. At CMP, the stock trades at 8.0x FY19E EBITDA, which is at the higher end of multiples for global peers. We maintain ‘HOLD/SP’ with TP of INR122.
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