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Target: ₹130
CMP: ₹118.45
NMDC’s Q1-FY24 EBITDA of ₹1,990 crore (up 4.9% YoY) was 17.5 per cent and 9.8 per cent ahead of our and consensus’ estimates.
Key points: Best-ever quarterly performance barring Q4-FY23; focus on volume growth; EBITDA margin sustained QoQ at 37 per cent due to better product mix; and cash & equivalents at Q1FY24-end were ₹11,280 crore.
Going ahead, management expects FY24 volume at 47-50mt; however, realisation is expected to remain range bound, in line with steel prices. Besides, capex is likely to go up further as management aims to reach 100mtpa capacity by FY30. We believe bulk of this capex is likely to be funded through internal accruals. We believe higher volume would not only result in lower fixed cost per tonne but also position the company as the market leader in merchant iron ore mining in the country.
Taking cognisance of Q1-FY24 performance and management’s guidance, we raise our FY24/FY25 EBITDA by 6 per cent each, resulting in a revised TP of ₹130 (earlier ₹118) on 5x FY25E EBITDA. Maintain ADD on NMDC stock.
We believe the surplus cash would also be enough to maintain the dividend yield of 5 per cent through to FY25.
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