The decision of Karnataka to withdraw the letter of lease renewal and put the Donimalai mine for auction has come as a negative surprise for NMDC. The Donimalai mine was likely to contribute ~0.5 MT per month if it had received all pending approvals and restarted operations. However, the recent development is likely to place Donimalai mine out of its purview currently and will put NMDC’s volume growth plan in a jeopardy. We value the stock on an SoTP basis and have a target price of Rs 95 with a HOLD recommendation.
After a steady performance despite production outage at Donimalai, we see earnings getting a boost from: 1) higher export realisation; and 2) production resumption at Donimalai. On the flip side, we still find uncertainty with respect to commissioning of the steel plant, but believe that the steel plant would be a significant value enabler once it gets operational. The stock is trading at an undemanding 3.9x FY21E EBITDA. Maintain ‘BUY/SO’ with a target price of INR135/share.
Valuation & Outlook: NMDC has started FY20 on a good note wherein it reported healthy growth in production and sales volume for Q1FY20. Furthermore, the recent verdict by the high court with respect to the Donimalai mining case also augurs well. We continue to value the stock on an SoTP basis and arrive at a target price of | 125 with a HOLD recommendation on the stock.
Valuation & Outlook: NMDC reported a steady set of Q4FY19 numbers wherein EBITDA margin came in higher than our estimate on the back of lower-than-expected operating cost. Going forward, we model sales volume of 31 MT for FY20E and 32 MT for FY21E. Furthermore, we expect EBITDA margins to hover around 50% levels for the next couple of years. We introduce our FY21E and value the stock on a SoTP basis. Hence, we arrive at a target price of | 115. We maintain our HOLD recommendation on the stock.
Valuations attractive but risk from special mining premium; Maintain Buy. We raise our FY19 EPS estimate by 8% to account for the beat. Operations at the Donimalai mine remain suspended. However, we expect NMDC to eventually get its MLs renewed without sharing any revenue. Steel plant may have some teething troubles in the initial years, but it is likely to be a valuable asset, as it will enjoy low-cost iron ore, economy of scale and high productivity. We value the stock at INR111/share, based on 3x EV/EBITDA for book value for CWIP at the end of FY20. Maintain Buy