13 February 2017
3QFY17 Results Update | Sector: Metals
NMDC
Buy
BSE SENSEX
28,352
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8,805
NMDC IN
3,164
459.6 / 6.9
150 / 79
-3/44/61
406
25.1
CMP: INR145
TP: INR179(+23%)
Strong quarter used for cleaning balance sheet
Strong volumes and prices driving upgrades; Reiterate Buy
NMDC’s 3Q results marked a significant improvement in its performance as
EBITDA increased 72% QoQ/121% YoY to INR14.2b (in-line) led by higher
volumes and realization. The EBITDA is adjusted for a few non-cash one-offs
(Exhibit 1). Other income was down 43% QoQ to INR1.6b on lower cash balance
post large buy-back. PAT, adjusted for the one-offs and exceptional charge, was
up 45% QoQ/57% YoY to INR10.3b (in-line).
Sales were up 25% QoQ/39% YoY to 10.1mt, led by an increase in domestic
steel production (+8.5% YTD December). Exports share was 7.8% (vol. of
0.78mt).
Production was up 54% QoQ/32% YoY to 9.7mt.
Domestic iron ore realization was up 15% QoQ to INR2,403/t. EBITDA/t rose
INR384 to INR1,415.
Raising volumes, prices and target price; Reiterate Buy
NMDC’s dispatches continue to grow strongly, driven by an increase in
domestic steel production, particular at the key customers of NMDC.
Favorable pellet economics is also fueling domestic iron ore demand.
Volumes in January were up ~39% YoY and likely to exit the year with ~36mt.
Earnings growth will be fueled by recently announced price hikes of INR125-
300/t on supportive international iron ore prices and strong demand.
We raise volumes by ~2% and realization by ~3% for FY18E/19E. TP is revised
to INR179/share (from INR168/share) based on 6.5x FY18E EV/EBITDA.
The stock trades cheap at 4.7x FY18E EV/EBITDA adjusted for the CWIP for
EBITDA CAGR of ~33% over FY16-18E.
Reiterate Buy.
Financials & Valuations (INR b)
2016 2017E
Y/E Mar
64.6
87.8
Net Sales
32.3
47.2
EBITDA
33.2
38.6
PAT
8.4
12.2
EPS (INR)
-49.7
45.9
Gr. (%)
75.9
76.1
BV/Sh (INR)
15.9
13.5
RoE (%)
15.6
12.5
RoCE (%)
17.3
11.9
P/E (x)
1.9
1.9
P/BV (x)
2018E
99.1
57.5
38.9
12.3
0.8
81.2
15.6
14.6
11.8
1.8
Estimate change
TP change
Rating change
Quarterly Performance – INR million
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
(SanjayJain@MotilalOswal.com); +91 22 6129 1523
Dhruv Muchhal
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549

NMDC
Exhibit 1: One-off/exceptional charges in 3QFY17
a. Service tax on royalty w.e.f April 1st 2016
b. Additional liability towards mine closure
c. Payment for railway line doubling
d. Provision for bad debt
One-off charges included in operating expenses
e. Additional liability towards mine closure
Total one-off/exceptional charges
INR m
1,079
118
778
1,984
3,959
2,013
5,972
Source: MOSL, Company
Exhibit 2: Target price derivation
Y/E March
EBITDA per ton (INR)
Volumes (m tons)
EBITDA
Target EV/EBITDA(x)
Target EV
Less: Net Debt
Add: CWIP
Equity Value
Target price (INR/share)
2015
2,549
30.5
77,777
2016
1,119
28.8
32,260
2017E
1,297
36.4
47,154
6.5
306,500
-48,741
129,193
484,435
2018E
1,507
38.2
57,548
6.5
374,059
-27,868
163,087
565,014
179
2019E
1,506
40.1
60,369
6.5
392,399
-32,033
175,087
599,518
189
-184,431
77,100
-132,666
97,229
Source: MOSL, Company
Exhibit 3: Quarterly operating highlights
1Q
7.94
8.59
0.67
7.92
4,047
4,467
2,993
2,796
935
FY15
2Q
3Q
6.45
8.11
7.27
6.97
0.68
6.59
4,272
4,600
3,160
2,760
1,141
0.37
6.60
4,229
4,333
3,127
2,796
771
4Q
7.94
7.69
0.75
6.94
3,678
3,733
2,760
1,848
1,325
1Q
5.98
6.66
0.00
6.66
2,786
3,050
1,960
1,655
884
FY16
2Q
3Q
6.45
7.36
6.45
7.22
0.00
6.45
2,409
2,917
1,660
1,457
585
0.38
6.84
2,102
2,233
1,527
892
873
4Q
8.78
8.51
0.75
7.77
1,797
1,850
1,610
634
984
FY17
1Q
2Q
7.63
6.31
7.78
8.01
0.75
7.03
2,212
1,967
1,660
0.53
7.49
2,170
1,700
1,460
3Q
9.71
10.06
0.78
9.27
2,484
2,100
1,793
Production - m tons
Sales volume - m tons
By markets
Exports
Domestic
Blended realization - INR/t
Published prices - INR/t
Lumps
Fines
EBITDA/t
Operating cost (ex-roy) - INR/t
1,050 1,030
1,415
754
926
685
Source: MOSL, Company
FY17E
34.2
36.4
2,414
1,118
334
165
619
626
463
1,297
FY18E
38.2
38.2
2,596
1,089
321
154
615
549
442
1,507
Exhibit 4: Annual operating highlights
Key metrics
Iron ore production - m tons
Iron ore sales volume - m tons
Blended realization - INR/t
Operating expenses - INR/t
Royalty/FDT/Cess
Selling
Production
Variable expenses
Fixed expenses
EBITDA - INR/t
Return Ratios
ROE (%)
ROCE (%)
ROIC (%)
FY11
25.2
26.2
4,320
1,036
355
432
249
731
306
3,284
29.7
29.5
383.5
FY12
27.8
27.3
4,125
855
375
53
427
513
342
3,270
31.6
31.5
299.4
FY13
27.2
26.3
4,074
1,112
491
311
309
842
398
2,963
26.8
26.7
197.5
FY14
30.0
30.5
3,954
1,406
442
442
521
1,002
404
2,548
22.6
22.6
112.5
FY15
31.0
30.5
4,049
1,500
573
383
544
1,065
436
2,549
20.8
20.8
86.6
FY16
28.6
28.8
2,239
1,120
371
145
605
638
464
1,119
15.9
15.6
58.2
13.5
15.6
12.5
14.6
43.2
59.2
Source: MOSL, Company
13 February 2017
2

NMDC
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2012
112,615
-0.9
89,281
79.3
1,328
87,953
0
20,169
-513
107,610
34,941
32.5
0
72,669
73,015
12.3
2012
3,965
240,099
244,064
0
1,001
245,065
23,882
11,994
11,888
14,942
2,478
237,177
4,589
7,370
202,646
22,572
21,420
6,447
14,973
215,757
245,065
2013
107,043
-4.9
77,838
72.7
1,385
76,452
0
22,389
-4,058
94,783
31,228
32.9
0
63,556
66,277
-9.2
2013
3,965
271,145
275,110
0
1,045
276,155
26,025
13,379
12,647
32,361
2,497
261,439
6,375
10,822
210,258
33,985
32,788
11,094
21,694
228,650
276,155
2014
120,582
12.6
77,713
64.4
1,504
76,209
0
20,945
455
97,609
33,391
34.2
0
64,218
63,919
-3.6
2014
3,965
295,918
299,883
0
1,073
300,956
28,506
14,883
13,623
52,769
2,504
245,874
6,812
14,484
186,572
38,005
13,814
11,092
2,722
232,060
300,956
2015
123,564
2.5
77,777
62.9
1,622
76,155
0
23,200
0
99,354
33,460
33.7
0
65,895
65,895
3.1
2015
3,965
319,353
323,317
0
984
324,301
29,446
16,109
13,337
77,100
5,619
248,642
6,919
17,523
184,431
39,768
20,397
2,263
18,134
228,245
324,301
2016
64,556
-47.8
32,260
50.0
2,078
30,183
0
17,744
0
47,927
14,769
30.8
0
33,157
33,157
-49.7
2016
3,965
297,146
301,110
14,970
1,222
317,302
37,304
18,234
19,070
97,229
6,954
210,203
6,370
18,961
147,636
37,237
16,154
3,244
12,909
194,050
317,302
2017E
87,802
36.0
47,154
53.7
2,227
44,927
0
9,044
0
53,971
15,359
28.5
0
38,612
38,612
16.5
2017E
3,164
237,700
240,864
14,970
1,222
257,056
41,304
20,461
20,843
129,193
6,954
117,786
4,811
12,028
63,711
37,237
17,720
4,811
12,909
100,066
257,056
(INR Million)
2018E
99,133
12.9
57,548
58.1
2,434
55,114
0
2,120
0
57,234
18,315
32.0
0
38,919
38,919
0.8
2018E
3,164
253,839
257,003
14,970
1,222
273,195
45,304
22,895
22,409
163,087
6,954
99,086
5,432
13,580
42,838
37,237
18,341
5,432
12,909
80,745
273,195
2019E
103,827
4.7
60,369
58.1
2,687
57,682
0
2,466
0
60,148
19,247
32.0
0
40,901
40,901
5.1
2019E
3,164
271,960
275,124
14,970
1,222
291,316
49,304
25,582
23,722
175,087
6,954
104,151
5,689
14,223
47,002
37,237
18,599
5,689
12,909
85,553
291,316
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
(INR Million)
13 February 2017
3

NMDC
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
EV/ton
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2012
18.4
18.8
61.6
4.5
26.3
7.9
7.7
2.4
3.3
4.2
3.1
5
31.6
31.5
299.4
0.5
24
-0.8
2012
89,281
19,656
-10,244
-34,941
-2,739
61,013
-10,418
50,595
-1,121
0
-11,539
0
0
0
-19,109
-19,109
30,365
172,281
202,646
2013
16.7
17.1
69.4
7.0
51.1
8.7
8.5
2.1
3.4
4.7
4.8
5
26.8
26.7
197.5
0.4
37
-0.8
2013
77,838
18,331
-5,281
-31,228
5
59,665
-19,563
40,102
-19
0
-19,582
0
0
0
-32,471
-32,471
7,612
202,646
210,258
2014
16.1
16.5
75.6
8.5
61.4
9.0
8.8
1.9
3.2
5.0
5.9
4
22.6
22.6
112.5
0.4
44
-0.6
2014
77,713
21,400
-27,095
-33,391
12
38,639
-22,888
15,751
-7
0
-22,895
0
0
0
-39,429
-39,429
-23,685
210,258
186,572
2015
16.6
17.0
81.5
8.6
44.5
8.7
8.5
1.8
3.2
5.0
5.9
4
20.8
20.8
86.6
0.4
52
-0.6
2015
77,777
23,200
-11,975
-30,314
-4,063
54,624
-24,331
30,293
-3,116
0
-27,447
0
0
0
-29,318
-29,318
-2,141
186,572
184,431
2016
8.4
8.9
75.9
11.0
177.0
17.3
16.3
1.9
6.9
13.7
7.6
5
15.9
15.6
58.2
0.2
50
-0.4
2016
32,260
17,744
93
-17,373
-3,565
29,159
-20,242
8,918
-1,335
0
-21,576
0
14,970
0
-58,694
-43,724
-36,141
184,431
148,290
2017E
12.2
12.9
76.1
6.0
59.0
11.9
11.2
1.9
4.7
8.7
4.1
4
13.5
12.5
43.2
0.3
50
-0.2
2017E
47,154
9,044
10,059
-15,359
0
50,898
-35,964
14,933
0
0
-35,964
-76,078
0
0
-22,780
-98,858
-83,925
147,636
63,711
2018E
12.3
13.1
81.2
6.0
58.5
11.8
11.1
1.8
4.3
7.5
4.1
4
15.6
14.6
59.2
0.4
50
-0.1
2018E
57,548
2,120
-1,552
-18,315
0
39,801
-37,894
1,907
0
0
-37,894
0
0
0
-22,780
-22,780
-20,873
63,711
42,838
2019E
12.9
13.8
87.0
6.0
55.7
11.2
10.5
1.7
4.1
7.1
4.1
4
15.0
14.1
62.6
0.4
50
-0.1
2019E
60,369
2,466
-643
-19,247
0
42,944
-16,000
26,944
0
0
-16,000
0
0
0
-22,780
-22,780
4,165
42,838
47,002
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
(INR Million)
13 February 2017
4

NMDC
Corporate profile
Company description
NMDC is India's largest iron ore producer, with a capacity
of 36mtpa. It produces ~30-32mtpa of iron ore from four
mining complexes in Chhattisgarh and Karnataka. In
addition to its iron ore operations, NMDC has a diamond
mine at Panna (Madhya Pradesh) and owns a 10.5MW
wind power plant in Karnataka. In July 2010, Sponge Iron
India, which has a small sponge iron capacity of 60ktpa,
was merged with NMDC. It is investing INR155b over the
next five years to expand its iron ore production to
50mtpa and forward integrate by setting up a 3mpta
steel plant in Chhattisgarh and 1.2mtpa pellet plant in
Karnataka.
Exhibit 2: Shareholding pattern (%)
Sep-16
Promoter
DII
FII
Others
80.0
14.0
3.4
2.7
Jun-16
80.0
13.5
3.8
2.7
Sep-15
80.0
13.0
3.6
3.5
Source: Capitaline
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
LIFE INSURANCE CORPORATION OF INDIA
LICI NEW ENDOWMENT PLUS-GROWTH
FUND
NA
NA
NA
% Holding
12.3
2.1
0.0
0.0
0.0
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
R Sridharan
D S Ahluwalia
A S Pardha Saradhi
Designation
Chairman & Managing
Director
Director (Finance)
Company Secretary
Exhibit 5: Directors
Name
T R K Rao
P K Satpathy
A K Srivastava
Pradip Bhargava
S M Nigam
Syedain Abbasi
Name
Sandeep Tula
N K Nanda
Bhagwati Mahesh Baldewa
Rajesh Mangal
Shymal K Sarkar
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Gopal Gupta & Co
Hanumanta Raju & Co
O P Totla & Co
Prasad Bharathula Associates
Tej Raj & Pal
Branch
Branch
Branch
Cost Auditor
Statutory
Source: Capitaline
Type
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
FY19
MOSL
forecast
12.2
12.3
12.9
Consensus
forecast
9.8
11.0
10.8
Variation (%)
25.2
12.1
19.5
Source: Bloomberg
13 February 2017
5

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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
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Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Motilal Oswal Securities Ltd
13 February 2017
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
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