NMDC - March 2013 Results Preview - Motilal Oswal

- Iron ore sales to improve 40% QoQ: We expect standalone net sales to increase 18% YoY (up 49% QoQ) to INR30.6b due to higher iron ore sales and improved realization on better product mix. We expect iron ores sales volume to increase 41% QoQ to 7.5m tons. Iron ore realization is likely to increase 6% QoQ to INR4,078/ton due to higher percentage of lumps in the mix. Lumps percentage should improve from 27% to 36% in 4QFY13E.

- EBITDA to increase 60% QoQ: We expect EBITDA to increase 60% QoQ to INR22.3b on higher iron ore volume and realization.

- Sales volume to clock CAGR of 5% over FY12-15E; Maintain Buy: We expect NMDC to deliver 32mt of iron ore sales in FY15E due to incremental capacity from Deposit 11b and Kumarswamy mine. Declining grades and availability of iron ore, increased regulatory vigil and increasing steel capacity have shifted the domestic iron ore demand-supply dynamics in favor of NMDC. The stock trades at 5.8x FY15E EPS, 1.4x FY15E BV and an EV of 2.5x FY15E EBITDA. Maintain Buy.

Source : Equity Bulls

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