NMDC - Volumes to move up, maintain buy - Centrum

NMDC's operational performance was below our expectations with EBITDA at Rs16.9bn (margin of 67.9%) as sales volume dropped by ~9% QoQ to ~5.3MT. Volumes suffered due to heavy monsoons but are expected to recover sharply from Q4 with iron ore sales volumes of 2.7 MT achieved in Jan-13.

NMDC suffered larger than expected price fall in Q3 but is seeing stable pricing as of now which could move up from Mar-13 onwards in our view on account of global price recovery and good domestic demand-supply dynamics.

We expect 7.5 MT of volumes in Q4 and 29 MT in FY14E as the company has taken some steps to improve its logistics including commissioning of the 3 mtpa railway loop line system at Chhattisgarh. We reduce our volumes and EBITDA estimates for FY13E/14E to account for lower volume performance in 9MFY13.

Maintain Buy with a reduced target price of Rs193.

Source : Equity Bulls

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