Buy NMDC Ltd For Target Rs.135 By Motilal Oswal Financial Services
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Volume momentum to continue, temporary headwinds in pricing
* Revenue stood at INR58.5b, down 13% YoY, but 12% above our estimate of INR52.4b. Blended ASP for the quarter stood at INR4,715/t, down 14% YoY and was INR395/t above our estimate of INR4,320/t.
* EBITDA stood at INR21.6b (down 25% YoY), 33% above our estimate of INR16.3b. NMDC posted better performance, on the back of lower input cost, better realizations, and higher volumes.
* APAT was down 29% YoY and stood at INR15.8b, but 24% above our estimate of INR12.7b.
* Exceptional income of INR12.3b includes a) receipt of INR9.6b from Monitoring Committee - toward 10% of the amount withheld for the period 01/01/19 to 31/03/22 and b) INR2.8b profit on Strategic disinvestment of NINL.
* In 4QFY23, NMDC has recorded its best ever quarterly production at 14.1t, up 2% YoY. Production from Chhattisgarh mines was down 1% YoY at 10.3mt and production from Karnataka mines stood at 3.8mt (up 10% YoY).
* NMDC posted the highest quarterly sales volume at 12.4mt (up 1% YoY). Sales from Chhattisgarh mines were down 4% YoY at 8.2mt, which was compensated by higher sales from Karnataka mines, which stood around 3.9mt.
* FY23 Sales/EBITDA/APAT stood at INR177b / INR61b / INR48b, down 32%/53%/51%. Production for FY23 crossed 40mt mark for the second consecutive year and production stood at 40.8mt (down 3% YoY) and sales stood at 38.3mt (down 5% YoY).
* Despite facing the highest rainfall in the Bailadila region, NMDC achieved a production 40.8mt. ? The Board declared a final dividend of INR2.85, taking the total dividend to INR6.6 for FY23.
Highlights from the management commentary
* NMDC is expected to produce and sell around 46-49mt of iron ore in FY24.
* Incremental capex will take the total capacity to 100mt in six to seven years.
* NMDC expects to clock the highest production and sales in 1QFY24.
* NMDC expects to register a net profit of around INR55b in FY24E.
* NMDC might continue its volume growth; however, the global iron ore market is facing certain headwinds and expects pricing pressure in the first two quarters.
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