NMDC Ltd - REDUCE - TP Rs.130 - Result Update - Kotak

- NMDC's EBITDA margin during the quarter declined sequentially, on account of weak realisation. Net sales during the quarter grew 39.2% YoY to Rs24.21bn (down 14.8% QoQ). EBITDA declined 19.5% QoQ to Rs12.03bn, with an EBITDA margin of 49.7%. PAT during the quarter, came in at Rs8.45bn, down 12.9% QoQ. Volume during the quarter declined, but we expect volume trajectory to remain strong in the coming quarters, but expectations of weak prices due to subdued global iron ore prices (increasing supplies) and surplus production in domestic markets, supports our cautious stance on iron ore and NMDC. At current valuation of 7.2x/7.0x FY18E/FY19E EV/EBITDA, the stock is fairly valued. We recommend REDUCE on NMDC, with a target price of Rs130. We have assigned value to the investment in steel plant at 50% discount.

- Upside risks: The government has begun the process of strategic sale of assets in public sector undertakings. For NMDC, the Cabinet Committee on Economic Affairs (CCEA) had approved the divestment of the Nagarnar steel plant. Any development on the same would augur well for NMDC.

Shares of NMDC LTD. was last trading in BSE at Rs.122.3 as compared to the previous close of Rs. 125.3. The total number of shares traded during the day was 344597 in over 1642 trades.

The stock hit an intraday high of Rs. 124.95 and intraday low of 121.9. The net turnover during the day was Rs. 42409560.

Source : Equity Bulls

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