NMDC’s best every performance since inception….BUY target Rs 252/-

NMDC is a mining company engaged in iron ore production, the company with a marketcap ~Rs73,684 cr is 80% government owned.  The recent ban on mining across states – Karnataka, Goa, Odisha has had varying impact on metal companies and mining companies.  A significant portion of supply from Odisha is hurt by the ban, the steel and sponge iron producers located in eastern part of country are facing shortage of iron ore such companies will be able source from NMDC mines in Chhattisgarh.

Iron ore prices have an upside potential in India, however appreciating USD/INR rate and cheaper imports may curtail this.  NMDC is expected to hike prices in June-July, also the discount between the pricing of iron ore fines and iron ore lumps should lessen and this will mean better realisations for NMDC going ahead.

The company has the best quality iron ore assets and the cost of production is low.  New pellet plant has also been commissioned in the last year. This coupled with the expectation that the steel demand should pick-up as macro economic indicators turn positive puts NMDC in a good spot.

For the quarter ending March, the company reported a net profit of Rs1962.14 crore up 34% YoY. Total Income as at Rs3884.49 crore up 21.2% over Rs 3204.25 crore a year ago. But the highlight of the quarter was that NMDC achieved a record production and sales of iron ore at 9.86MT and 9.4MT respectively. For the year they produced 30.02MT and had sales of 30.5MT. Turnover was at Rs12,058 crore for the year. Dividend payout to is at a record level of 850%.

Production increased by 3% in the quarter while sales went up by 14% to 9.40MT, this lead to the 34% PAT increase to Rs 1962cores for the quarter.

For the year production was up 10% and sales 26%.  PAT however was up 1% to Rs 6420 crores.

Due to higher dividend payout the stock may get re-rated.  Also the traction in domestic pricing of iron fines and the expected volume growth in the FY14-FY16E period put NMDC in a strong position.  Considering the FY15E EPS of about Rs 18 and the EV/EBITDA valuation the stock is BUY with a target of Rs 252/-

 

 

Comments

  • Madam,

    I have always been an avid follower of your blog/moneycontrol chats and television appearances. After a brief hiatus, it feels good to see you back on your blog with recommendations of fundamentally good stocks. I am certain that your calls would fetch handsome returns for investors as I myself have benefited through your accurate recos for quite some time including the pre-election rally. From my experiences in the past, very few analysts have the potential to cherry pick stocks with sound reasoning. You are one of those gems as I’ve always observed that your stock recommendations are backed up by good fundamentals and a technical trend that support the stock price movement. Your calls have been very objective and rational which I believe makes all those who follow your calls successful investors.

    Thank you mam!

    Warm Regards,
    Vasanth.

    Vasanth KumarJune 12, 2014
    • Thanks so much, those are kind words indeed. I hope that my calls continue to make you money!

      Sharmila JoshiJune 13, 2014
  • Madam,
    I fully agree with Vasanth Kumar as I am also following your advise and found very very helpful.

    Kishore MehtaJune 18, 2014
    • thanks, keep reading.

      Sharmila

      Sharmila JoshiNovember 10, 2014
  • Dear Madam,

    Good evening,

    I recently came across your blog.your recommendations were good and i could get some decent returns out of that.
    One suggestion mam: with your recommendation can you pls tell the time frame also

    Pramoth kumarJuly 8, 2014
    • I normally recommend for the long term more than 9 months

      Sharmila

      Sharmila JoshiNovember 7, 2014
  • respected madam, i have seen your blog today only. i am very much impressed byour analysis of stocks. i have four hundred shares nmdc at rs. 170. if possible, advise me whether i should hold or exit. y

    durlabhNovember 6, 2014
    • Thanks so much, stay invested in NMDC>

      Sharmila

      Sharmila JoshiNovember 7, 2014
    • Stay invested.

      Sharmila

      Sharmila JoshiNovember 7, 2014
  • Hello
    it is steady since last 1 year. why nmdc is such a dull stock n not pickung up any movement?

    jaydeepNovember 7, 2014
    • Yes, its not a momentum stock, but steady earnings that its been showing keep my confidence in the stock intact. Also there is lot of uncertainty of the mining space still – as we get clarification on that this stock will move.

      Sharmila

      Sharmila JoshiNovember 7, 2014
  • Hi Madam,

    I have around 500 NMDC stocks @ 158. Now the stock is trading at 140 level. What do you recommend ?

    Shall i Accumulate more, HOLD or SELL ?

    Thanks in advance
    Sumitabha

    SumitabhaNovember 25, 2014
    • Be patient, you can accumulate

      Sharmila JoshiApril 8, 2015
  • i am holding 1000 shares since 2 years but not giving any return. any target are you giving madam? time period? or should i exit?

    jigishaFebruary 17, 2015
    • which stock? NMDC? Please be patient, once regulatory issues are out of the way stock will perform

      Sharmila JoshiApril 8, 2015

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