Result Update: NMDC - REDUCE - TP Rs.130 - Kotak

- NMDC numbers were above estimates, on account of higher than expected realisation and lower costs. Net sales during the quarter grew 65.1% YoY to Rs28.42bn. Volume during the quarter grew 18.2% YoY to 9.18MT (down 68.2% QoQ), while realisation during the quarter stood at Rs3,068/tonne. Strong operating performance, led to 36.3%/89.4% YoY/QoQ increase in PAT to Rs9.69 bn, higher than estimates of Rs8.92 bn. We have revised our realisation assumptions, higher, resulting into upward revision in FY18 earnings to Rs11.1 (earlier Rs9.6) and FY19E earnings to Rs11.2 (earlier Rs9.7). Though, we expect volume trajectory to remain strong, but expectations of weak prices due to surplus production in domestic markets, make us believe that, the current valuation of 7.2x/7.0x FY18E/FY19E EBITDA, is fairly valued and offer limited upside. We recommend REDUCE (earlier SELL) on NMDC, with a revised target price of Rs130 (earlier Rs110). We have assigned value to the investment in steel plant at 50% discount.

- Upside risks: The government has begun the process of strategic sale of assets in public sector undertakings For NMDC, the Cabinet Committee on Economic Affairs (CCEA) had approved the divestment of the Nagarnar steel plant. Any development on the same would augur well for NMDC.

Shares of NMDC LTD. was last trading in BSE at Rs.121.6 as compared to the previous close of Rs. 126.25. The total number of shares traded during the day was 878736 in over 6778 trades.

The stock hit an intraday high of Rs. 129.65 and intraday low of 118.7. The net turnover during the day was Rs. 110163814.

Source : Equity Bulls

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