Buy NMDC; target of Rs 135: Sharekhan

Buy

Sharekhan's research report on NMDC

Consolidated PAT at Rs. 1,652 crore (up 17% q-o-q) was 28% above our estimate, led by a beat in EBITDA margins, higher other income, and lower depreciation. EBITDA/tonne rose 4% q-o-q to Rs. 1,816 and was 23% above our estimate led by better-than-expected blended iron ore realisation of Rs. 4,915/tonne (up 4.2% q-o-q) as impact of price cuts was back ended. Iron ore sales volume of 11 mt (down 12% q-o-q) was marginally below our estimate of 11.2 mt. We believe near-term iron ore prices would stay rangebound and growth for NMDC would be largely driven by higher volumes (management guided for 15-20% y-o-y volume growth in FY24).

Outlook

We maintain a Buy on NMDC with a revised PT of Rs. 135 given inexpensive valuation of 3.4x/1.1x its FY25E EV/EBITDA and P/BV, respectively and the stock offers a healthy dividend yield of ~6%. High cash of ~Rs. 11,200 crore or 33% of current market capitalisation provide comfort.

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NMDC - 19 -08 - 2023 - khan