NMDC Ltd. share price target

Donimalai mine. Unperturbed by the ongoing legal issue, we are rather more concerned on the i) structural risk to the domestic iron ore pricing and ii) sharp shrinkage in market share of merchant miners post auction of mines expiring by March-2020 in Odisha. Mine auctions benefit the manufacturer as it serves raw material security replacing the dependence on merchant miner at lower cost. It would act as the key enabler for capacity creation with no impact on State Govt's revenue from royalty. We downgrade NMDC to Reduce as we expect steep increase in Odisha's production (due to last year of...

Viability of NMDC's mining operations is threatened by Karnataka's pre-condition to share of 80% revenue for renewing mining leases of Donimalai, which has capacity of 4mtpa. The outcome of legal and diplomatic settlement may set a precedent for other mines. This was unexpected because public sector enterprises (PSEs) have been getting their leases renewed without sharing of any revenue - e.g. leases of Nalco's bauxite mines have been recently extended to 2029 and 2032without any share in revenue; many PSEs have been allotted coal blocks on a nomination basis

NMDC's Q2FY19 performance came in below our estimates. The company reported a sales volume of 6.7 million tonne (MT), down 19.2% YoY, 1.4% QoQ, lower than our estimate of 7 MT. The topline...

13 November 2018 2QFY19 adjusted EBITDA declined 7% QoQ (+8% YoY) to INR13.8b, marginally below our estimate of INR14.8b due to lower-than-expected realization and higher operating expenses. EBITDA is adjusted for (a) rail line doubling payment of INR480m and (b) expected credit loss of INR747m, which are non-recurring. Higher discounting at Karnataka impacted realization. EBITDA per ton declined 6% QoQ to INR2,061 (USD30) due to higher operating expenses. NMDCs volumes were impacted over the last few quarters due to higher prices and monsoon-related disruption. Domestic prices have become competitive as global iron ore prices have strengthened. We expect iron ore volume CAGR of 5-6% over the next 4-5 years from the existing mines. The steel plant is likely to produce about 1mt in FY21 and full 3mt in FY22. Margins in the steel business are likely to be 10,000/t, as it has many advantages.

In September 2018, NMDC took a price hike of | 200/tonne for iron ore lumps and | 150/tonne for iron ore fines (the price hike will be with effect from September 7, 2018). The revised prices for iron ore lumps are at | 3550/tonne (from | 3350/tonne previously) while prices of fines have been revised to | 3110/tonne (from | 2960/tonne previously). The increase in iron ore prices is in the backdrop of a healthy demand scenario and increased pellet prices. Cumulatively, since July 2018, iron ore lumps prices have increased by ~| 500/tonne while fines prices have...

NMDC has revised prices of domestic iron ore thrice YTD, adding up to Rs300 and Rs350 per tonne for iron ore fines and lump ore to Rs2,960/tonne and Rs3,350/tonne, respectively. We believe that the recent hike in the iron ore prices is backed by 4% month on month increase in international iron ore prices, rupee depreciation and the surge in pellet prices (~4 years high / +25% YoY). Though, we continue to remain cautious on the outlook of iron ore prices for the medium to long term perspective. But, expect it to remain...

Revenue fell by 37.63% to Rs. 2421.99 Cr in Q1FY19 when compared to the previous quarter. NMDC Ltd Q1FY19 results Comment

For Q1FY19, NMDC reported a healthy performance on the profitability front. NMDC reported sales volume of 6.84 million tonne (MT), lower than our estimate of 7.5 MT. Topline for the quarter came in at | 2422.0 crore, down 14.8% YoY, 37.6 QoQ vs. our estimate of | 2486 crore. The blended iron ore realisations during the quarter was at | 3504/tonne, up ~18% YoY, down 4.1% QoQ On the back of healthy iron ore realisations YoY and lower costs, the company for the quarter reported an EBITDA of | 1423.9 crore (down...

8 August 2018 NMDCs 1QFY19 adj. EBITDA declined 29% QoQ (-9% YoY) to INR14.8b (est. of INR13.5b) due to 35% QoQ/26% YoY decline in volumes to 6.8mt. EBITDA is adjusted for (a) rail line doubling payment of INR291m and (b) expected credit loss of INR258m, which are non-recurring. Adj. PAT declined 30% QoQ to INR9.7b (est. Production was down 39% QoQ/19% YoY to 6.9mt due to low dispatches. Domestic realization was down 3% QoQ (+21% YoY) to INR3,541/t (6% beat).

For Q4FY18, NMDC reported a healthy performance, which came in above our estimates. The company reported a sales volume of 10.5 million tonne (MT) (our estimate: 10.0 MT). Topline for the quarter was at | 3883 crore up 35.2% YoY, 57.3% QoQ, higher than our estimate of | 3347.6 crore. The blended iron ore realisations increased 26% YoY, 21.8% QoQ to | 3653/tonne (vs. Q4FY17: | 2898/tonne, Q3FY18: | 2999/tonne, our estimate: | 3236/tonne) On the back of healthy iron ore realisations, EBITDA was healthy at...