Prabhudas Lilladher has given Buy recommendation for NMDC with a target price of Rs. 145 in its research report issued on Feb 09, 2021
Prabhudas Lilladher’s research report on NMDC
NMDC reported Q3FY21 EBITDA above our/consensus estimates by 8%/16%. The beat was largely due to better than expected performance on both realisations and cost. Unlike past, NMDC has been forthcoming this time in undertaking price hikes in tandem with strong global prices and shortage in domestic market. Company reduced prices by 11%-12% in last week due to softness in domestic demand, improved supplies in Odisha and slide in global prices. 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 and 2) EV/T of US$500 for steel plant.