IGI Logo

Steady operational performance..

About the stock: Incorporated in 1958, NMDC is India's largest merchant iron ore miner.

• During FY23, NMDC’s iron ore production volume was at ~41 million tonne (MT) while sales volume for FY23 was at ~38 MT

• NMDC is one of the lowest cost iron ore producers in the world

Q4FY23 Results: NMDC reported a steady operational performance for Q4FY23.

• For Q4FY23, NMDC reported sales volumes of 12.4 million tonnes (MT), up 30% QoQ broadly in line with our estimate of 12.5 MT. Iron ore sales realisation for the quarter was at | 4663/tonne, up 22% QoQ (our estimate of | 4500/tonne). EBITDA/tonne for the quarter was at | 1745/tonne, up 46% QoQ (our estimate of | 1675/tonne)

• NMDC’s standalone revenue from operations was at | 5851 crore, up 57% QoQ but down 14% YoY (our estimate of | 5603 crore). Standalone EBITDA for the quarter was at | 2165 crore, up 89% QoQ but down 21% YoY (our estimate of | 2085 crore)

• NMDC reported exceptional income to the tune of | 1237.27 crore. Exceptional income includes a) | 957 crore from monitoring committee towards 10% of the amount withheld for the period January 1, 2019 to March 31, 2022 b) | 279.67 crore profit on strategic divestment of NINL (net off the gross amount of | 380.27 crore received against the amount invested in NINL of | 100.60 crore). Ensuing standalone PAT (after exceptional income) for the quarter was at | 2277 crore, up 22% YoY and 156% QoQ

What should investors do? NMDC’s share price has given a return of ~24% in the last one year (from ~| 84 in May2022 to ~| 104 levels in May 2023).

• On the back of declining trend in global iron ore prices over the last few months, we downgrade the stock from BUY to HOLD

Target Price and Valuation: We value NMDC at | 115, 4.5x FY25E EV/EBITDA.

Key triggers for future price performance:

• For FY24E, NMDC has given a production volume guidance in the range of ~46-50 MT

• Going forward, for FY24E, we expect an EBITDA margin of 30.1% while for FY25E we expect EBITDA margin at 33.3%

Alternate Stock Idea: In our metal sector coverage, we also like Jindal Stainless.

• Jindal Stainless (JSL) has manufacturing facilities in Jajpur, Odisha and Hisar, Haryana and an overseas unit in Indonesia.

• BUY with a target price of | 350

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html SEBI Registration number is INZ000183631

Above views are of the author and not of the website kindly read disclaime