Sharekhan has given Buy recommendation for NMDC with a target price of Rs. 240 in its research report issued on Aug 13, 2021
Sharekhan’s research report on NMDC
Q1FY22 PAT of Rs. 3,186 crore (up 12.4% q-o-q) was 16% above our estimate led by beat in EBITDA margin at Rs. 4,420/tonne (up 15.6% q-o-q) on the back of lower royalty payments (31% of revenues) and inventory gains. Blended iron ore realisation at Rs. 6,823/tonne (up 11.2% q-o-q) was below our estimate due to nil export volumes. Iron ore sales volume at 11.1 mt (down 14.8% q-o-q)] was in line with our estimates. A potential demerger and subsequent strategic stake sale of Nagarnat steel plant could unlock value and act as a key re-rating trigger for NMDC
Outlook
We maintain a Buy on NMDC with an unchanged PT of Rs. 240 as valuation of 2.7x its FY23E EV/EBITDA for the core business is attractive considering a strong earnings growth outlook, RoE/RoCE of 22.2%/24.5% and a dividend yield of 7%.