NMDC - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, NMDC's top line came in-line with our estimates, while its profitability came in ahead of our estimates. We recommend Accumulate on the stock.

Realization drops by 10.2% yoy and 9.4% qoq: NMDC's net sales decreased by 31.2% yoy to Rs.2,595cr (in-line with our estimate of Rs.2,524cr). Blended realization dipped during the quarter (-10.2% yoy and -9.4% qoq to Rs.3,982/tonne). Iron ore sales volumes also declined by 23.9% yoy to 6.45mn tonnes. Iron ore sales volumes were affected due to breakdown of slurry pipeline in Bailadila mines and lower availability of railway rakes.

EBITDA/tonne declined by 5.2% yoy: During the quarter, NMDC's EBITDA decreased by 27.9% yoy to Rs.1,975cr, lower than the decline in sales, and as a result EBITDA margin expanded by 347bp yoy to 76.1%. EBITDA/tonne decreased by 5.2% yoy and 13.3% qoq to Rs.3,062 due to lower average realization and, hence, PAT declined by 21.7% yoy to Rs.1,643cr (above our estimate of Rs.1,528cr).

Outlook and valuation: Over the past five years, NMDC has traded at an average EV/EBITDA of 13.7x, compared to its current valuation of 3.8x FY2014E EV/EBITDA. Strong balance sheet, presence in sellers market (iron ore), low cost of production, high-grade mines, long mine life and compelling valuations make NMDC an attractive bet at these levels. Valuing the stock at 4.5x FY2013E EV/EBITDA, we derive a fair price of Rs.187 and recommend Accumulate on the stock.

Source : Equity Bulls

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