LKP Research's research report on NMDC
NMDC Limited (NMDC) is India’s largest producer of iron ore. Operating under the Ministry of Steel, NMDC is a ‘Navratna’ public sector enterprise and owns and operates highly mechanized iron ore mines in Chhattisgarh and Karnataka. NMDC is one of the low-cost producers of iron ore in the world. With iron-ore production of around 45.1 million tonnes (MT) in FY24, at an average of 64% Fe, NMDC sells one of the best grade Iron ore globally. We believe with the onset of key structural changes in the economy and a decade long investment cycle triggered largely by the government capex is expected to continue and in comparison to its international counterparts, the domestic steel sector stands in a favorable position. It is projected that the domestic crude steel capacity will hit around 175 MT in FY24, boasting an estimated capacity utilization rate of approximately 82%. This translates to an anticipated iron ore requirement of roughly 282 MT in FY24E with NMDC commanding a ~16% market share.
Outlook
We Initiate NMDC at 6.5x FY26E EV/EBITDA to arrive at a target price of ₹297. Over FY24E-26E we expect NMDC to clock a Revenue/EBITDA/PAT CAGR of 12.9%/18.8%/19.1% respectively.
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