Dec 11, 2012, 11.58 AM | Source: Moneycontrol.com
Microsec is bullish on NMDC and has recommended buy rating on the stock with a target of Rs 225 in its December 10, 2012 research report.
, Microsec |
“NMDC was incorporated in 1958, as a Government of India fully owned public enterprise. It is under the administrative control of the Ministry of Steel, Government of India. NMDC is India's largest iron ore producer and exporter, presently producing about 27MT of iron ore from its 3 fully mechanized mines viz., Bailadila Deposit-14/11C, Bailadila Deposit-5, 10/11A (Chhattisgarh State) and Donimalai Iron Ore Mines in Karnataka. It has the only mechanized diamond mine in the country with a capacity of 1 lakh carats per annum at Panna (Madhya Pradesh State).”
“NMDC is India's single largest iron ore producer, with an annual production capacity of 32 million tonnes per annum (MTPA) and total reserves of 1354.64 million tonnes (MT). The production capacity is expected to reach 51MTPA by FY16e with opening of two new mines in Chattisgarh and Karnataka with mining capacity of 7MTPA each and expansion in existing mines of 2MTPA. In addition, it possesses the world’s best quality iron ore with FE content of greater than 64%. Hence, capacity addition would lead to higher volumes, thus, adding growth significantly to the topline and the bottomline as well. NMDC is one of the low cost producers of Iron Ore in the World, with an average cost of production of US$17/tonne (INR857 crore) in FY12. In FY11, the average cost of production stood at INR24/tonne (INR1083 crore), which has dropped ~20% in FY12. NMDC’s low cost production is due to its highly mechanized mines i.e. open cast mines, low mining cost on account of its high grade iron ore reserves with Fe content of more than 64% and economical/inexpensive labour. In addition to this, NMDC’s mines which are located in Chattisgarh and Karnataka, allows it to take the benefit from scale of operations and has the access to efficient logistics, which in return saves the company’s cost. Currently, he EBITDA Margin of NMDC is ~79% as compared to the average EBITDA Margin of ~47% of its international players and ~42% of its only domestic iron ore player-Sesa Goa.”
“We recommend NMDC a “STRONG BUY”. NMDC is India's largest iron ore producer and exporter, presently producing about 27MT of iron ore from its 3 fully mechanized mines viz., Bailadila Deposit- 14/11C, Bailadila Deposit-5, 10/11A (Chhattisgarh State) and Donimalai Iron Ore Mines in Karnataka. With ~40% market share in the iron ore producing industry, substantial high quality iron ore reserves, addition and expansion of mines leading to higher volume growth, superior margins backed by low cost of production, foray into value added projects and improved realization in future, NMDC IS likely to grow at a CAGR of 13.48% in terms of revenue and 12.67% in terms of PAT over FY12-16,” says Microsec research report.
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