NMDC Ltd. share price target

NMDC Limited is engaged in mining of iron ore.

Risks emanating from rising domestic supplies are very well factored in our estimates with FY22 realisations assumed at steep cut of ~20% over current levels and hefty discount of ~45% (above the historical average of 35%) to import parity price. On the back of stable outlook on global iron ore prices and value unlocking with the demerger of steel plant, we maintain BUY rating with TP of Rs145 based on 1) EV/EBITDA of 4x FY22e for iron ore operations...

NMDC underperformed steel stocks by a wide margin over last three months due to uncertainty regarding payment of premium for its Donimalai mine's lease renewal. After two years impasse, Govt of Karnataka renewed Donimalai mines (with capacity of 7mtpa) at a premium of 22.5% of sales price. We expect that similar premium would be paid for its iron ore operations in Chhattisgarh, which constitutes 78% of its overall volumes. Severe shortage in domestic market (due to supply disruptions in Odisha), strong profitability of steel producers and firm outlook on global prices shall...

Process underway for divestment of steel plant NMDC reported Q2FY21 EBITDA missed our estimates by 5% while it is 4% above consensus estimates. Miss was largely due to lower than expected realisations, partially offset by lower costs. Unlike past, NMDC has been forthcoming this time in undertaking price hikes in tandem with strong global prices and shortage in domestic market....

Retain Buy on valuations despite risk of higher levies NMDC's 2QFY21 EBITDA declined 7% YoY to INR10.3b as lower iron ore prices offset the benefit of 14% YoY volume growth. Outlook for 2HFY21, however, is strong as currently prices are ~30% higher (or ~INR800/t) than 2QFY21 average, which should drive significantly higher profitability. The government's proposal to levy an additional premium on NMDC's renewed mining leases, however, has emerged as a key overhang. If a premium of 22.5% of revenue is levied on all mines of NMDC, it poses a...

estimates of Rs1,743 largely due to one-time covid-19 related donation equivalent to Rs227/t. Impacted by weak revenue and one-time CSR expenses, EBITDA fell 49% QoQ/60% YoY at Rs7.5bn (PLe:Rs7.9bn). PAT fell 55% QoQ/55% YoY at Rs5.3bn (PLe:Rs6.2bn) due to 46% QoQ/42% YoY fall in other...

4 August 2020 volumes increased 7% YoY to 2.57mt on improving demand from steel plants as domestic demand improves. This, coupled with higher international iron ore prices, has enabled NMDC to raise prices this month by INR200/t (~9%) to INR2,360/2,650 per ton for fines/lumps. We believe NMDCs iron ore prices should sustain in 2HFY21 due to rising steel prices (up ~INR2,000/t MoM), higher pellet prices (up 20% MoM to INR7,200/t), and reduced iron ore supply from Odisha mines. Volume growth of 7% YoY reported by NMDC (to 2.57mt) in July20 has surprised and is three months ahead of our expectation of positive volume print in 2HFY21. While iron ore production from several auctioned mines in Odisha has commenced in the current quarter, we believe production from these mines would be lower by >30% YoY in FY21, supporting NMDCs volumes in the near term.

Model sales volume of 28 MT for FY21E, 35 MT for FY22E For FY20, NMDC's production volume was at 31.48 MT, down 3% YoY (32.36 MT for FY19) while sales volume was also at 31.51 MT, down 3% YoY (32.36 MT for FY19). Going forward, we model sales volume of 28 MT for FY21E (downward revised from 35 MT earlier). We also introduce FY22E sales volume estimate at 35 MT. April-May cumulative production down 31%, sales down 35% NMDC started FY21 on a subdued note. For April-May 2020, production...

Global iron ore prices shot up by ~18% in last couple of months due to strong Change in Estimates | Target | Reco revival in Chinese steel production, low iron ore inventory and supply disruption in Brazil on account of Covid-19 virus spread. Based on our...

9 May 2020 According to industry sources, NMDC has sharply reduced prices for iron ore fines and lumps by INR400/t (~17%) starting 9 May20. volumes declined 49% YoY to 1.38mt amid weak demand, which has led to the company cutting prices for both fines and lumps by INR400/t (~17%). Thus, prices of NMDCs iron ore fines/lumps now stand at INR1,960/INR2,250 per ton. We believe iron ore prices would remain subdued in 1HFY21 due to weak demand as most steel plants are operating at lower utilizations. As a result, we have factored in an increase of INR350/t (~15%) for 2HFY21, implying ~10% higher prices in FY21E over current prices. Most secondary steel producers resumed operations in May20 and large steel players have also indicated higher utilizations for the month. As a result, we expect lower volume decline in May-Jun20 and factor in decline of ~35% YoY for 1QFY21.