MOSL: NMDC (Buy)-Miss led by lower-than-expected sales volumes
NMDC: Miss led by lower-than-expected sales volumes
(NMDC IN, Mkt Cap USD5b, CMP INR116, TP INR147, 26% Upside, Buy)
Production recovers post heavy monsoon season
- NMDC's 3QFY20 results highlight the rebound in production and sales post a heavy monsoon season. The shift to a lower tax rate also boosted profits.
- While we expect the recent price hikes to aid profitability, we remain conservative on prices heading into FY21. The company's upcoming steel plant should be valuable. Maintain Buy with TP of INR147/share.
Operational miss on account of lower sales volumes
- 3QFY20 adj. EBITDA was up 34% QoQ to INR15.7b on the back of higher production at 8.6mt (+71% QoQ) and higher sales volume at 8.4mt (+45% QoQ). EBITDA though was 11% lower v/s est. lower-than-expected volumes (7% miss). PBT increased 37% QoQ to INR16.2b while reported PAT rose 96% QoQ to INR13.8b as the company moved to the new tax regime. Adj. PAT was up 37% QoQ to INR11.7b (in-line).
- Reported domestic realization declined INR313 QoQ to INR2,578/t on the back of price declines during the quarter.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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