Sharekhan's research report on NMDC
Q1FY23 PAT at Rs. 1,442 crore (down 54.7% y-o-y; down 20.7% q-o-q) was 13% above our estimate led by beat in margins, lower-than-expected depreciation partially offset by lower other income and losses clocked by associates/JVs. EBITDA margin surprised positively with 11% q-o-q rise to Rs. 2434/tonne (22% above estimate) led by higher-than-expected iron ore sales realisation at Rs. 6,050/tonne and lower-than expected operating cost. NMDC has taken steep iron ore fine/lump price cut of 46%/36% since April 2022 and the same would impact realisation/margin from Q2FY23. NMDC received shareholders/creditors approval for demerger of Nagarnar Steel plant and the demerger process is expected to be completed by September 2022.
Outlook
We maintain our Hold on NMDC with lower PT of Rs. 122 (reflects cut in earnings estimate) as we expect weak earnings momentum going forward. Likely removal of iron ore/pellet/steel export duty could reduce gap between domestic iron ore and international iron ore price.
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