Motilal Oswal's research report on NMDC
NMDC’s net sales declined 51% YoY and 30% QoQ to INR33b in 2QFY23 (in line). Iron ore sales fell 6% YoY (up 8% QoQ) at 8.43mt. YoY decline in iron ore sales reflects demand slow down in the merchant ore market. EBITDA shrunk 73% YoY and 55% QoQ to INR8.5b, and was significantly lower than our estimate of INR12b despite in-line revenue, indicating higherthan-estimated operating costs partly offset by lower royalty and additional premium as IBM prices come at a lag. EBITDA/t at INR1,009 was down 71% YoY and 59% QoQ, which reflects higher costs as both sales volume and ASP were in line. APAT fell 62% YoY and 40% QoQ to INR8.9b, 9% miss on our estimate of INR9.7b. While EBITDA miss was at 27%, APAT miss was just 9% due to significantly higher-than-estimated other income (+3.8x YoY/+2x QoQ).
The stock is trading at 4.1x FY23E EV/EBITDA on core mining business. We value the steel business at 50% to the CWIP at INR38/sh. We believe the stock adequately reflects the current downturn in the domestic iron ore market. Maintain Neutral with a revised SoTP-based TP of INR124 (v/s INR128 earlier).