MOSL: NMDC (Buy) - Earnings outlook remains strong
(NMDC IN, Mkt Cap USD7.1b, CMP INR179, TP INR215, 20% Upside, Buy)
- NMDC is a play on strong iron ore prices and volumes, well-reflected in its 4QFY21 result – EBITDA at INR42.4b (+53% YoY) and EBITDA/t at INR3,825 (+113% YoY) were the highest ever.
- We raise our FY22/FY23 EBITDA forecast by 61%/38% to factor in higher pricing and volumes. Reiterate Buy.
EBITDA up 53% YoY on higher pricing and better volumes
- Revenue / EBITDA / Adjusted PAT rose 57%/53%/51% QoQ (in-line) to INR68.5b/INR42.4b/INR31.8b in 4QFY21 on higher volumes and realization.
- Sales volumes stood at 11.1mt, up 29% YoY and 19% QoQ. The Donimalai mines resumed operations in 4QFY21 and contributed 0.44mt (4%) to volumes. Export volumes increased 23% YoY to 0.82mt.
- On 28th Mar’21, an amendment to the MMDR Act (1957) came into effect. This requires NMDC to pay an additional 22.5% royalty on iron ore sales from all mines renewed post 2015 (Kumaraswamy mine due for renewal in Oct’22). This resulted in expenditure of INR1.49b (Chhattisgarh mines – INR1.0b and Donimalai – INR0.5b) in 4QFY21.
- Blended realization grew 32% QoQ to INR6,174/t on sharp price hikes in 4QFY21. As a result, EBITDA/t increased 28% QoQ to INR3,825 on higher iron ore prices.
- The company provisioned INR3.43b towards income tax payments for earlier years.
- Net cash increased by INR19.8b YoY to INR38.1b in FY21.
- FY21 rev / EBITDA / adj PAT rose 31%/41%/33% to INR153.7b/INR87.9b/INR65.9b.
- OCF/FCF stood at INR73.3b/INR57.3b in FY21 (v/s INR20.5b/-INR3.4b in FY20).
NMDC Limited is an India-based company engaged in mining of iron ore. The Company's segments include Iron Ore, and Other minerals & services. It is also engaged in the production and sale of diamond, sponge iron and wind power. Its projects under construction include Bailadila Deposit-11/B, Kumaraswamy Iron Ore Project, 1.2 million tons per annum (MTPA) Pellet Plant at Donimalai, 3.0 million tons per annum (MTPA) Integrated Steel Plant in Chhattisgarh, Panthal Magnesite Project, Screening Plant III at Kirandul Complex, Screening Plant II at Donimalai Complex, doubling of Railway Line between Kirandul and Jagdalpur, Steel Plant at Bellary and Rail Link between Dalli-Rajhara-Rowghat-Jagdalpur Railway Line Project. It proposes to diversify into other commodities, such as steel making raw materials (coking coal, manganese ore nickel); fertilizer raw materials (rock phosphate potash), and thermal coal. It also proposes to invest in raw materials, such as tungsten and rare earth minerals.
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