16 June 2020
4QFY20 Results Update | Sector: Metals
NMDC
Estimate change
TP change
Rating change
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CMP: INR85
TP: INR110 (+30%)
Buy
Miss due to lower-than-expected realization
Volume-related challenges persist; valuation attractive
National Mineral Development Corporation (NMDC)’s 4QFY20 results
disappointed, with EBITDA declining 23% YoY on lower volumes and weaker-
than-expected realization.
While we expect the recent iron ore price cuts to support volumes in the
near term, we expect prices to recover from 2HFY21. We have lowered our
NMDC IN
3,062
FY21/FY22 EBITDA estimates by 12%/13%. Maintain
Buy,
with TP of
260 / 3.4
INR110/sh.
140 / 62
7/-8/-6
728
30.4
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Financials & Valuations (INR b)
Y/E MARCH
2020 2021E 2022E
Sales
EBITDA
Adj. PAT
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
Net D:E
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA(x)
Div. Yield (%)
5.5
0.9
3.9
6.5
9.4
0.9
6.7
6.5
7.6
0.9
5.4
6.5
-0.1
17.5
15.5
54.1
-0.1
9.9
9.2
60.7
-0.1
11.6
10.9
49.2
117.0
62.2
46.9
53.2
15.3
89.9
83.6
35.3
27.7
42.3
9.1
93.5
98.5
44.3
34.2
45.0
11.2
23.5
99.2
-1.9 -40.9
Note: Above nos. are consol.
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
69.7
72.3
DII
20.1
17.7
FII
6.0
6.0
Others
4.3
4.0
FII Includes depository receipts
Operational miss on account of lower-than-expected realization
4QFY20 adj. EBITDA declined 5% QoQ (-23% YoY) to INR15.5b due to
negative operating leverage. Sales volumes at 8.6mt, although up 2% QoQ,
were down 16% YoY. Similarly, production stood at 9.5mt, up 10% QoQ;
however, it fell 11% YoY, leading to the lower absorption of fixed costs.
EBITDA was 16% lower v/s est., primarily attributed to lower-than-expected
realization (INR3,698/t v/s est. of INR3,922/t).
Derived domestic realization came in at INR3,494/t, up INR100/t QoQ,
against an ~INR450/t average increase in announced price hikes in 4QFY20.
As a result, EBITDA/t stood at INR1,796, down 8% QoQ / 8% YoY.
PBT declined 3% QoQ to INR16.3b. The company paid income tax of INR7.7b
under a one-time settlement scheme of pending cases (shown as contingent
liabilities in the books). The company also paid INR1.4b as a one-time
settlement for service tax liability against the provision of INR2.8b, resulting
in net write-back of INR1.4b.
Reported PAT declined 74% QoQ / 76% YoY to INR3.5b. Adj. PAT after
exceptional items of INR9.3b was down 10% QoQ (6% YoY) to INR12.7b.
The company made an upfront payment of INR2.3b toward the allocation of
the Tokisud and Rohne coal blocks during the quarter.
The company reported net cash of INR18.3b (INR6/sh) at the end of FY20.
FY20 rev. / EBITDA / adj. PAT declined 4%/13%/2% YoY to
INR117b/INR62b/INR47b.
Weak profitability expected in 1QFY21
During April–May, NMDC took a cumulative price cut of INR900/t (~30%).
Moreover, sales declined 35% YoY to 3.93mt, weighed by the impact of
COVID-19.
The company expects iron ore demand and pricing to remain weak in
1HFY21, following which it expects normalization.
We also expect prices to be subdued in 1HFY21 and rise by INR300/t over
current levels in 2HFY21.
Mar-19
72.3
18.9
3.9
4.9
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com) +91 22 7199 2309
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com); +91 22 61291572
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.