Motilal - Oswal - NMDC - Update On Demerger
Motilal - Oswal - NMDC - Update On Demerger
Motilal - Oswal - NMDC - Update On Demerger
NMDC
BSE SENSEX S&P CNX
57,897 17,233 CMP: INR133 TP: INR185 (+39%) Buy
Steel plant de-merger the next trigger point
Reduction in iron ore prices in line with expectations
Feb-21
Apr-21
Aug-21
Oct-21
Dec-21
Jun-21
INR167) and (b) the Steel asset (valued at 25% of CWIP at INR17/sh). Key
risks to our call are a further slowdown in China through FY23 and the
uncontrolled spread of the Omicron variant of COVID-19.
Story in charts
Exhibit 1: Key operating metrics
Key metrics FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY23E FY24
Iron ore production - m tons 31.0 28.6 34.0 35.6 32.4 31.5 34.2 40.0 43.0 45.
Iron ore sales volume - m tons 30.5 28.8 35.6 36.1 32.4 31.5 33.0 40.0 43.0 45.
Blended realization - INR/t 4,049 2,233 2,479 3,220 3,756 3,713 4,663 6,291 5,437 4,88
Operating expenses - INR/t 1,383 1,030 1,217 1,468 1,549 1,739 1,995 3,170 3,028 2,81
EBITDA - INR/t 2,666 1,203 1,262 1,752 2,207 1,974 2,669 3,121 2,409 2,06
Source: MOFSL, Company
Exhibit 2: Profitability remains above cycle average despite steep correction
7,248
7,264
5,993
EBITDA per ton NMDC's Realization
1,050
1,415
1,030
4,469
4,185
3,644
3,635
3,615
3,593
3,573
3,499
3,418
3,273
3,198
2,975
2,938
2,893
2,871
2,839
2,403
2,160
2,093
1,463
1,976
1,765
1,549
1,652
2,182
2,061
2,618
1,968
2,222
1,913
1,942
1,796
1,203
1,560
2,982
3,825
4,650
3,466
4QFY17
4QFY18
1QFY17
2QFY17
3QFY17
1QFY18
2QFY18
3QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
Source: MOFSL, Company
10.5
10.1 10.2
9.8
9.2 9.3 9.0 9.0
8.7 8.7 8.4 8.6
8.0 8.3 8.1
7.8
6.8 6.7 6.6
6.3
5.8
2QFY18
2QFY20
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
Source: MOFSL, Company
Exhibit 4: EBITDA continues to be robust despite lower ASP owing to rising iron ore sales volumes
EBITDA (INR m) Sales vol
43
40
36 36
31 31 32 32 33
27 29
26
89,281 77,838 81,604 81,369 34,695 44,944 63,198 71,416 62,203 87,959 124,845 103,575
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
Source:
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NMDC
14,000 6,000
9,000 4,000
4,000 2,000
(1,000) -
Nov-16
Nov-17
Nov-18
May-16
May-17
May-18
May-19
Mar-16
Jul-16
Sep-16
Jul-17
Sep-17
Jan-18
Jul-18
Sep-18
Jan-16
Jan-17
Mar-17
Mar-18
Jan-19
Mar-19
Source: MOFSL, Company
Exhibit 6: With steel capex now funded through debt, we expect the dividend payout to increase substantially
14.3
23 15 12.1
24 26
8.3
6.4 6.4 5.8
5.3
3.4 3.9 4.0 4.2 4.0
1.7 1.3
0.0 51 58 42 174 75 63 46 54 36 59 60
FY10
FY17
FY21E
FY22E
FY23E
FY09
FY11
FY12
FY13
FY14
FY15
FY16
FY18
FY19
FY20
Source: MOFSL, Company
Exhibit 7: NMDC Valuation remains at comfortable level
EV/EBITDA (x) Avg (x) Max (x) Min (x) +1SD -1SD
20.0 18.7
15.0
10.9
10.0 7.2
Sep-15
Dec-16
Sep-20
Dec-21
Mar-13
Jun-14
Mar-18
Jun-19
Source: MOSL
Exhibit 8: Valuation remains inexpensive
Target price Calculations
Y/E March 2018 2019 2020 2021 2022E 2023E
Iron ore
EBITDA per ton (INR) 1,752 2,207 1,974 2,669 3,121 2,409
Volumes (m tons) 36.1 32.4 31.5 33.0 40.0 43.0
EBITDA 63,198 71,416 62,203 87,959 1,24,845 1,03,575
Target EV/EBITDA(x) 4.5 4.5
Target EV 5,61,801 4,66,086
Add: Net Cash 49,381 42,436 18,268 38,115 27,490 27,595
Add: value of NISP at 25% CWIP 31,300 34,481 38,679 42,692 46,442 50,192
Equity Value 6,35,733 5,43,873
Target price (INR/share) 217 185
EV/EBITDA Valuation excluding NISP 5.4 4.4 4.3 2.9 3.0 3.5
Source: MOFSL
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NMDC
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NMDC
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NMDC
NOTES
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NMDC
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NMDC
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