Sharekhan has given Buy recommendation for NMDC with a target price of Rs. 165 in its research report issued on Mar 03, 2021
Sharekhan’s research report on NMDC
Multiple triggers for higher iron ore production given re-start of Donimalai mine, expansion for Kumarasamy mines and debottlenecking at Chhattisgarh mines. We expect 30%/7% y-o-y growth in iron ore sales volume to 43mt/46mt in FY22E/FY23E. Higher volume and elevated iron ore price (given high international price >$150-160/ton currently and likely iron ore deficit in domestic market until FY23) would cushion NMDC’s earnings from potential royalty premium (assumed at 22.5%). Strategic sale of Nagarnar Steel plant would result into value unlocking of CWIP of Rs16,500 crore and could add further value (~Rs22-25/share) to the stock as street is ascribing only 50% value to steel plant.
We re-initiate coverage on NMDC with a Buy rating and PT of Rs. 165 as valuation of 3.7x FY23E EV/EBITDA for core business factors in risks associated with higher royalty payout but ignores value unlocking from Nagarnar Steel Plant.