Accumulate NMDC; target of Rs 98: Prabhudas Lilladher

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Prabhudas Lilladher's research report on NMDC

NMDC reported Q2FY21 EBITDA missed our estimates by 5% while it is 4% above consensus estimates. Miss was largely due to lower than expected realisations, partially offset by lower costs. Unlike past, NMDC has been forthcoming this time in undertaking price hikes in tandem with strong global prices and shortage in domestic market. However, clarity regarding premium on lease renewal would hold the key for stock.

Outlook

On the back of stable outlook on global iron ore prices and value unlocking with the demerger of steel plant, we maintain Accumulate rating with TP of Rs98 based on 1) EV/EBITDA of 4x FY22e for iron ore operations (factoring 22% premium on entire iron ore operations) and 2) EV/T of US$475 for steel plant.

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