ICICI Direct recommended hold rating on NMDC with a target price of Rs 90 in its research report dated February 04, 2019.
ICICI Direct's research report on NMDC
NMDC reported a healthy set of numbers for Q3FY19 on the back of better-than-expected realisations and higher-than-expected sales volume. Hence for the quarter topline, EBITDA, PAT came in notably higher than our estimates. The company reported a sales volume of 8.7 million tonne (MT), up 7.4% YoY, 29.9% QoQ, higher than our estimate of 8.1 MT. The topline came in at Rs 3649.4 crore, up 47.8% YoY, 49.7% QoQ, higher than our estimate of Rs 3177.9 crore EBITDA margin came in at 59.0% (49.0% in Q3FY18, 51.7% in Q2FY19), higher than our estimate of 54.1%. Absolute EBITDA came in at Rs 2154.4 crore, up 78.1% YoY, 71.1% QoQ, higher than our estimate of Rs 1720.6 crore. The corresponding EBITDA/tonne came in at Rs 2475/tonne (vs. Q3FY18: Rs 1494/tonne and Q2FY19: Rs 1878/tonne) higher than our estimate of Rs 2124/tonne The company reported other income of Rs 136.1 crore, depreciation of Rs 69.4 crore and finance cost of Rs 9.6 crore. The tax incidence for the quarter came in at 28.7% (vs. 51.5% in Q2FY19). PAT was at Rs 1576.8 crore, up 77.8% YoY, 147.7% QoQ (our estimate of Rs 1064.3 crore).
On the back of price cuts taken by the company, we downward revise our FY20E estimates. Furthermore, the uncertainty with respect to Donimalai mines is likely to act as dampener. We await further clarity regarding the Donimalai mine status. We continue to value the company on an SOTP basis and arrive at a target price of Rs 100. We maintain our HOLD recommendation on the stock.
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