9 August 2017
1QFY18 Results Update | Sector: Metals
NMDC
Buy
BSE SENSEX
31,798
S&P CNX
9,908
CMP: INR126
TP: INR180(+43%)
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Strong operating performance; pricing power improving
Valuations are compelling; Reiterating Buy
1QFY18 adj. EBITDA grew 98% YoY (+13% QoQ) to INR16.2b, exceeding estimate
by 7%, due to higher regional and mix premiums. EBITDA is adjusted for (a) rail
line doubling payment of INR411m and (b) expected credit loss of INR815m,
which are non-recurring. Adj. PAT grew 72% YoY (+23% QoQ) to INR11.4b.
Sales increased 18% YoY to 9.2mt, while production grew 12% YoY to 8.5mt.
Share in exports increased 110bp QoQ to 8%.
Domestic sales realization increased INR67/t QoQ to INR2,938/t, surprising
positively (est. of INR2,726), due to higher share of Karnataka volumes at 37%
(+348bp QoQ) and higher product and regional premiums. Exports NSR
increased 32% QoQ to USD76/t (est. of USD60).
EBITDA per ton rose INR302 QoQ to INR1,765/t on higher realization and
normalization of employee cost.
Pricing power improving; valuations compelling; Reiterate Buy
NMDC’s iron ore has now become very competitive after a price cut in July.
Preliminary data suggest volumes growth has picked up in July. Improving iron
ore prices in seaborne trade have bettered pricing power. NMDC can supply
20% more volumes without additional capex. We expect 6% volume CAGR over
FY17-20E.
At CMP, adjusting for CWIP, the valuations at 3.5x FY19E EV/EBITDA are
compelling. NMDC has appointed bankers for the sale of its steel plant. We
thus believe that CWIP deserves at least book value. We value the stock at
INR180/share (59% upside), based on 6.5x EV/EBITDA FY19E and book value for
CWIP. Reiterate
Buy.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
NMDC IN
3,164
399.4 / 6.3
153 / 99
8/-27/12
473
25.1
Financials & Valuations (INR b)
2017 2018E 2019E
Y/E Mar
88.3 104.4 104.3
Net Sales
44.9
57.3
57.0
EBITDA
31.5
39.3
38.4
PAT
10.0
12.4
12.1
EPS (INR)
11.7
24.9
-2.4
Gr. (%)
71.2
76.4
81.3
BV/Sh (INR)
12.8
15.2
15.6
RoE (%)
12.2
14.7
15.2
RoCE (%)
12.8
10.3
10.5
P/E (x)
1.8
1.7
1.6
P/BV (x)
Estimate change
TP change
Rating change
Y/E March
Quarterly Performance (Consolidated)
Production (m tons)
Sales (m tons)
Avg Dom. NSR (INR/t)
Net Sales
EBITDA
Change (QoQ %)
EBITDA per ton (USD)
EBITDA per ton (INR/t)
Interest
Depreciation
Other Income
PBT (before EO Item)
Extra-ordinary item
PBT (after EO Item)
Total Tax
% Tax
Reported PAT
Adjusted PAT
1Q
7.6
7.8
2,160
17,207
8,164
-18.7
16
1,050
81
560
3,452
10,975
0
10,975
3,862
35.2
7,113
6,619
FY17
2Q
3Q
6.3
9.7
8.0
10.1
2,093
2,403
17,392 24,979
8,258 14,226
1.2
72.3
15
21
1,030
1,415
15
53
544
551
2,735
1,559
10,434 15,180
0 -5,972
10,434
9,208
2,727
3,257
26.1
35.4
7,708
5,952
6,293
9,156
4Q
10.4
9.8
2,871
28,717
14,295
0.5
22
1,463
59
307
1,343
15,273
-2,961
12,312
7,193
58.4
5,119
9,211
1Q
8.5
9.2
2,938
28,415
16,206
98.5
27
1,765
82
467
1,286
16,944
-1,258
15,686
5,994
38.2
9,692
11,364
FY18
2QE
3QE
8.4
10.6
8.4
10.6
2,486
2,486
22,004 27,353
10,872 16,475
-32.9
51.5
20
24
1,292
1,560
0
0
601
616
812
786
11,083 16,644
0
0
11,083 16,644
3,547
5,326
32.0
32.0
7,537 11,318
7,433 11,163
4QE
10.3
10.3
2,486
26,643
13,701
-16.8
20
1,335
0
631
829
13,898
0
13,898
4,447
32.0
9,451
9,322
FY17
FY18E
35.6
38.4
35.6
38.4
2,410
2,599
88,294 104,415
44,944 57,254
28.4
27.4
19
23
1,262
1,490
208
1,962
2,315
9,088
3,712
51,862 58,651
-8,933
42,929 58,651
17,038 19,314
39.7
32.9
25,891 39,337
31,279 39,337
FY18
1Q
8.5
9.2
2,726
25,962
15,172
85.8
26
1,647
0
586
828
15,414
0
15,414
4,933
32.0
10,482
10,482
vs Est
(%)
0
0
8
9
7
7
7
-20
55
10
2
22
19
-8
8
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Sanjay Jain – Research Analyst
(SanjayJain@MotilalOswal.com); +91 22 6129 1523
Dhruv Muchhal – Research Analyst
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549