Why Angel Broking picks NMDC over Coal India, MOIL

Angel Broking has come out with its report on mining sector. The research firm recommends investors to Buy NMDC at these levels.

Recent declines in the stock prices of the three mining companies, viz. Coal India (CIL), MOIL and NMDC, have led to questions in the minds of investors as to which company can provide higher upside from here. We analyzed all the three miners on different factors categorized under the parameters of industry (market share, end-user dependency and mining tax), business (mine life, risk to volume growth, immunity to price declines and staff cost) and valuation (EV/EBITDA). Our analysis points out that NMDC could be a winner amongst the three.

On the industry front, we believe CIL is better placed as compared to MOIL and NMDC as the company is dependent on the power sector, which is relatively stable as compared to the steel sector. However, the upcoming 26% mining tax will hurt CIL the most. However, it should be noted that CIL spends ~5% of its net sales (~18% of its net profit) on corporate social responsibility (CSR), which could be reduced to partially mitigate the impact of mining tax. Further, it could take some price hikes to partially offset the impact of mining tax.

On the volume growth front, NMDC scores the best, as it is poised for the highest volume growth over FY2011-13 compared to CIL and MOIL. MOIL

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