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NMDC (Natmin) : Outlook Remains Bleak
NMDC (Natmin) : Outlook Remains Bleak
NMDC (Natmin) : Outlook Remains Bleak
:
:
:
:
NMDC (NATMIN)
Hold
| 100
12 months
3%
Whats Changed?
Target
EPS FY16E
EPS FY17E
Rating
Quarterly Performance
Revenue
EBITDA
EBITDA (%)
PAT
Q1FY16 Q1FY15
1,806.4 3,476.7
1,102.7 2,402.1
61.0
69.1
1,010.1 1,915.0
QoQ (%)
-36.1
-22.4
1079 bps
-25.0
Key Financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY14
11,899.5
7,771.3
6,420.0
16.2
FY15E
12,197.7
7,777.7
6,421.9
16.2
FY16E
9,158.2
4,513.3
4,014.8
10.1
FY17E
10,513.9
5,214.1
4,372.6
11.0
FY15E
6.0
6.2
81.5
2.6
1.2
19.9
23.6
FY16E
9.6
9.9
84.7
4.8
1.1
12.0
12.9
FY17E
8.8
9.1
88.7
5.3
1.1
12.4
14.1
Valuation summary
P/E
Target P/E
BV
EV / EBITDA
P/BV
RoNW
RoCE
FY14
6.0
6.2
75.6
2.5
1.3
21.4
25.4
Stock data
Particular
Market Capitalization
Total Debt (FY15E)
Cash and Investments (FY15E)
EV
52 week H/L
Equity capital
Face value
Amount
| 38457.6 Crore
| 0 Crore
| 18443.2 Crore
| 20014.4 Crore
188 / 96
| 396.5 Crore
|1
1M
-11.6
-12.6
3M
0.6
-23.1
| 97
6M
0.7
-28.8
12M
1.9
-42.4
Research Analyst
Dewang Sanghavi
dewang.sanghavi@icicisecurities.com
Variance Analysis
Change in estimates
Q1FY16
Q1FY16E
Q1FY15
YoY (%)
Q4FY15
QoQ (%)
Revenue
Other Income
Employee Expense
Raw Material Expense
1,806.4
488.7
174.3
169.4
2,072.0
446.5
169.1
182.7
3,476.7
541.8
180.8
112.8
-48.0
-9.8
-3.6
50.1
2,828.6
726.2
140.1
192.8
-36.1
-32.7
24.5
-12.2
164.4
344.1
271.5
-39.5
388.5
-57.7
16.0
179.7
1,102.7
61.0
40.1
0.0
0.0
1,551.3
541.2
1,010.1
198.9
174.4
1,002.8
48.4
40.4
0.0
0.0
1,409.0
487.5
921.5
331.0
178.5
2,402.1
69.1
40.0
0.0
0.0
2,903.9
988.9
1,915.0
-95.2
0.7
-54.1
-805 bps
0.1
NA
NA
-46.6
-45.3
-47.3
287.4
398.6
1,421.3
50.2
28.0
0.0
55.4
2,064.1
717.0
1,347.1
-94.4
-54.9
-22.4
1079 bps
43.0
NA
NA
-24.8
-24.5
-25.0
6.7
6.6
8.6
-22.7
7.7
-13.6
2,688
1,658
3,075
1,525
4,009
2,800
-32.9
-40.8
3,639
1,851
-26.1
-10.4
Comments
Topline came in lower than our estimate on the back of muted
realisations
Other income came in broadly in line with our estimate
Iron ore sales volume came in broadly in line with our estimates
Blended realisations came in lower than our estimate on the back of
negligible exports
Reported EBITDA/tonne came in higher than our estimate
Change in estimates
(| Crore)
Total Op. Income
EBITDA
EBITDA Margin (%)
PAT
EPS (|)
Old
11,683.9
5,781.8
49.5
FY16E
New
9,326.9
4,513.3
48.4
% Change
-20.2
-21.9
-109 bps
Old
13,904.4
7,005.7
50.4
FY17E
New
10,763.9
5,214.1
48.4
% Change
-22.6
-25.6
-194 bps
4,748.9
12.0
4,014.8
10.1
-15.5
-15.5
5,335.2
13.5
4,372.6
11.0
-18.0
-18.0
Comments
Estimates revised downwards for FY16E and FY17E
Assumptions
FY15
Iron ore sales volume
(MT)
Current
FY16E
FY17E
30.5
32.0
Earlier
FY16E
FY17E
35.0
32.0
Comments
Page 2
Company Analysis
NMDC Ltd (NMDC), a Navratna public sector enterprise, is engaged in
mining iron ore, a key material used in steel manufacturing. The company
is Indias largest iron ore miner having access to superior quality iron ore
assets with reserve & resource (R&R) base of 1361 MT.
Volume led growth to drive earnings
After hitting a peak production level of ~30 MT in FY08, NMDCs output
had been on a declining trend with iron ore production dropping to 24 MT
in FY10 due to the damage done to Essar Steels slurry pipeline in May
2009 (capacity 8 MT, 276 km). Since then, Essar Steel has been sourcing
iron ore from NMDC through rail & road resulting in a gradual increase in
iron ore production to 27.3 MT in FY12 and further to 30.1 MT in FY14.
Going forward, on the back of additional mines coming on stream, we
expect a production volume CAGR of 7.1% in FY15-17E. We have
modelled production volume of 32 MT for FY16E and 35 for FY17E (30.5
MT for FY15).
Exhibit 1: Iron ore production and sales trend
40.0
40
35.0
10.0
million tonne
32.0
32.0
30.5
30.5
30.0
30.5
15.0
27.2
26.3
20.0
35.0
35.0
25.0
27.3
27.3
million tonne
30.0
30
20
10
9.7
9.1
9.3
8.7
19.0
20.9
21.3
23.4
25.3
FY13
FY14
FY15
FY16E
FY17E
4.2
5.6
8.2
21.0
21.7
FY11
FY12
5.0
0.0
FY12
FY13
FY14
FY15
FY16E
FY17E
Chhattisgarh Total
Karnataka Total
100%
Fines: Fines are iron ore masses, which have loose binding
and need to be beneficiated before being charged to the blast
furnace. They are readily used as a feed for sintering &
pelletisation process
40%
80%
60%
20%
63%
64%
65%
65%
65%
65%
37%
36%
35%
35%
35%
35%
FY12
FY13
FY14
FY15
FY16E
FY17E
0%
Lumps proportion
Fines proportion
Page 3
2.5
2.3
0.4
1.6
29.5
32.5
10
25.0
28.3
15
28.2
26.3
20
FY14
FY15E
FY16E
FY17E
24.7
27.3
25
26.9
30.0
30.5
30
23.8
30.5
32.0
million tonne
million tonne
35.0
2.6
35
35.0
2.4
40
40.0
5
0
20.0
FY12
FY13
FY14
FY15
FY16E
FY17E
FY11
FY12
FY13
Domestic Sales
Exports
Page 4
Value
5214
EV/EBITDA multiple
5.5
28678
10998
39676
396.5
100
FY14
FY15E
FY16E
FY17E
Sales
(| cr)
11899.5
12197.7
9158.2
10513.9
Growth
(%)
-0.9
2.5
-24.9
14.8
EPS
(|)
16.2
16.2
10.1
11.0
Growth
(%)
11.8
0.0
-37.5
8.9
PE
(x)
6.0
6.0
9.6
8.8
EV/EBITDA
(x)
2.5
2.6
4.8
5.3
RoNW
(%)
21.4
19.9
12.0
12.4
Page 5
RoCE
(%)
25.4
23.6
12.9
14.1
Company snapshot
600
500
400
300
Target Price: 100
200
100
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Key events
Date
Apr-08
Event
Speculation over imposition of 15% export duty on exports of iron ore from India (export duty currently prevailing at per tonne basis based on Fe grade)
Nov-08
Revises new contracts for iron ore exports with South Korea and Japan. Undertakes steep price hikes (80-96%) on the same
Jun-09
Naxals blow up Essar Steel's pipeline transporting iron ore fines from NMDC's mines in Chhattisgarh to its beneficiation plant in Andhra Pradesh
Nov-09
Odisha government asks miners to halt work on account of flouting of environmental rules. Domestic iron ore supply restricted
Mar-10
Government divests its stake in NMDC. Share sale price fixed at | 300
Mar-11
Jul-11
Iron ore mining ban imposed in Karnataka with NMDC being the only miner allowed to mine under supervision of Supreme Court of India
Dec-11
Sep-12
Mines & Mineral (Development & Regulation) Bill introduced in Parliament. Proposes payment of amount equivalent to royalty for development of the areas in which
the miners operate. Export duty increased to 30% iron ore exports from India
Mining ban imposed in Goa
Oct-12
Apr-13
Reports yearly numbers. Proposes a dividend of | 7/share for FY13. Gives strong production guidance
Oct-13
Increases the price of its products for the first time in calendar year 2013. Iron ore fines & lumps prices increased by | 100/tonne
Dec-13
Increases the price of iron ore fines & lumps by | 200 each for December 2013
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Shareholding Pattern
Name
Latest Filing Date % O/S
Government of India
31-Dec-14 80.00
Life Insurance Corporation of India
11-Apr-15 10.12
LIC Nomura Mutual Fund Asset Management Company
31-Dec-14 1.34
Eastspring Investments (Singapore) Limited
31-Jan-15 0.67
The Vanguard Group, Inc.
30-Apr-15 0.53
Investec Asset Management Ltd.
31-Mar-15 0.50
Matthews International Capital Management, L.L.C.
31-Jan-15 0.33
Robeco Institutional Asset Management B.V.
31-Jan-15 0.29
HSBC Global Asset Management (Hong Kong) Limited
28-Feb-15 0.28
Mellon Capital Management Corporation
30-Apr-15 0.21
Position (m)
3,172.0
401.4
53.1
26.5
20.9
19.8
13.2
11.7
11.1
8.4
Change (m)
0.0
83.6
0.0
0.0
0.1
1.4
-0.1
0.0
0.3
0.2
(in %)
Promoter
FII
DII
Others
Jun-14 Sep-14
80.0
80.0
7.0
6.8
10.2
10.6
2.8
2.6
Recent Activity
Buys
Investor name
Life Insurance Corporation of India
PGGM Vermogensbeheer B.V.
Investec Asset Management Ltd.
Religare Invesco Asset Management Company Private Limited
Deutsche Asset & Wealth Management Investment GmbH
Value
168.86m
9.54m
2.81m
2.08m
1.15m
Shares
83.63m
4.15m
1.36m
1.01m
0.60m
Sells
Investor name
Waddell & Reed Investment Management Company
Fidelity Worldwide Investment (UK) Ltd.
Charlemagne Capital (U.K.) Ltd.
T. Rowe Price Associates, Inc.
HSBC Global Asset Management (UK) Limited
Value
-10.86m
-9.70m
-8.14m
-6.61m
-5.73m
Shares
-4.72m
-3.51m
-3.20m
-3.19m
-2.54m
Page 6
Financial summary
Profit and loss statement
(Year-end March)
Operating Income (Iron ore)
Other minerals and services
Total Operating Income
Growth (%)
Raw Material Expenses
Employee Expenses
Royalty & Cess
Selling & other Expenses
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Exceptional Item
Total Tax
PAT
Growth (%)
EPS (|)
(| crore)
FY14
11899.5
158.7
12058.2
12.6
358.9
706.2
960.4
2,261.4
4,286.9
7771.3
5.4
150.4
1.9
2,094.5
9,713.6
-45.5
3,339.0
6,420.0
1.2
16.2
FY15
12197.7
158.7
12356.4
2.5
330.9
700.1
1,390.1
2,157.7
4,578.7
7777.7
0.1
162.2
0.0
2,265.4
9,880.9
113.0
3,346.0
6,421.9
0.0
16.2
FY16E
9158.2
168.8
9326.9
-24.5
394.8
723.9
1,725.9
1,969.0
4,813.6
4513.3
-42.0
172.3
0.0
1,804.6
6,145.6
0.0
2,130.8
4,014.8
-37.5
10.1
FY17E
10513.9
250.0
10763.9
15.4
398.6
647.5
2,237.5
2,266.2
5,549.8
5214.1
15.5
247.5
0.0
1,658.7
6,625.2
0.0
2,252.6
4,372.6
8.9
11.0
(| crore)
FY14
6,420.0
150.4
-812.0
-1,895.8
0.0
3,862.6
-0.7
-2,288.9
1.1
-2,288.5
0.0
0.0
-3,943.2
0.5
0.0
-3,942.7
-2,368.6
21,025.7
18,657.1
FY15
6,421.9
162.2
-490.9
647.4
0.0
6,740.6
-311.6
-2,566.7
2.1
-2,876.1
0.0
0.0
-3,966.1
0.0
-112.3
-4,078.4
-213.9
18,657.1
18,443.2
FY16E
4,014.8
172.3
717.9
-393.9
0.0
4,511.2
-25.0
-3,500.0
0.0
-3,525.0
0.0
0.0
-2,783.2
0.0
0.0
-2,783.2
-1,797.1
18,443.2
16,646.1
FY17E
4,372.6
247.5
-605.2
145.5
0.0
4,160.5
-25.0
-7,000.0
0.0
-7,025.0
0.0
0.0
-2,783.2
0.0
0.0
-2,783.2
-5,647.7
16,646.1
10,998.4
FY15
FY16E
FY17E
16.2
16.6
81.5
8.6
46.5
10.1
10.6
84.7
6.0
42.0
11.0
11.7
88.7
6.0
27.7
62.9
80.0
52.6
20.7
52.4
40.9
48.4
65.9
43.8
22.0
52.0
40.0
48.4
61.6
41.6
22.0
51.0
38.0
19.9
23.6
57.1
12.0
12.9
26.6
12.4
14.1
21.1
6.0
2.6
1.6
3.2
1.2
9.6
4.8
2.4
4.2
1.1
8.8
5.3
2.6
3.7
1.1
0.0
0.0
12.4
12.1
0.0
0.0
13.9
13.6
0.0
0.0
9.9
9.5
Balance sheet
(| crore)
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest / Others
Total Liabilities
FY14
FY15
FY16E
FY17E
396.5
29,591.8
29,988.3
0.0
107.3
29.1
30,124.5
396.5
31,935.3
32,331.7
0.0
98.4
40.1
32,470.2
396.5
33,166.8
33,563.3
0.0
98.4
40.1
33,701.8
396.5
34,756.3
35,152.7
0.0
98.4
40.1
35,291.2
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Current Liabilities
Provisions
Current Liabilities & Prov
Net Current Assets
Others Assets
Application of Funds
3,127.5
1,488.3
1,639.2
5,000.0
6,639.2
250.4
681.2
1,448.4
3,069.3
731.3
18,657.1
24,587.2
1,338.9
13.4
1,352.3
23,235.0
0.0
30,124.5
3,627.5
1,650.5
1,977.0
7,066.7
9,043.7
561.9
691.9
1,752.3
2,963.7
1,013.1
18,443.2
24,864.2
1,367.1
632.5
1,999.7
22,864.5
0.0
32,470.2
8,127.5
1,822.8
6,304.7
6,066.7
12,371.4
586.9
552.0
1,304.7
2,747.5
1,099.0
16,646.1
22,349.3
1,003.6
602.2
1,605.8
20,743.4
0.0
33,701.8
16,627.5
2,070.4
14,557.1
4,566.7
19,123.8
611.9
633.7
1,469.1
2,943.9
1,261.7
10,998.4
17,306.8
1,094.6
656.8
1,751.4
15,555.4
0.0
35,291.2
Key ratios
(Year-end March)
FY14
Per share data (|)
EPS
16.2
Cash EPS
16.6
BV
75.6
DPS
8.5
Cash Per Share (Incl Invst)
47.1
Operating Ratios (%)
EBITDA Margin
64.4
PBT / Total Op. income
80.6
PAT Margin
54.0
Inventory days
20.9
Debtor days
44.4
Creditor days
41.1
Return Ratios (%)
RoE
21.4
RoCE
25.4
RoIC
68.8
Valuation Ratios (x)
P/E
6.0
EV / EBITDA
2.5
EV / Net Sales
1.7
Market Cap / Sales
3.2
Price to Book Value
1.3
Solvency Ratios
Debt/EBITDA
0.0
Debt / Equity
0.0
Current Ratio
18.2
Quick Ratio
17.7
Source: Company, ICICIdirect.com Research
Page 7
(|)
EPS (|)
M Cap
TP (|) Rating
P/E (x)
EV/EBITDA (x)
35.8
17.9
13.3
10.9
11.2
9.1
6.9
34.0
(| Cr)
FY15
FY16E
FY17E
29.3
ROCE(%)
41.6
ROE(%)
371
450
Buy
234576
21.7
43.2
37.0
36.8
40.7
96
130
Hold
19803
13.5
9.6
15.2
9.3
13.1
8.3
9.1
8.7
7.0
4.5
5.0
4.9
5.4
2.2
4.9
146
175
Hold
61812
16.3
19.4
18.3
9.0
7.6
8.0
7.1
5.5
6.2
16.5
14.3
11.4
18.5
17.3
14.6
JSW Steel
878
825
Hold
21212
76.3
24.8
58.9
10.7
32.7
13.8
5.6
7.4
6.0
10.3
6.6
8.5
8.0
2.5
5.7
NMDC
100
100
Hold
39591
16.2
10.1
11.0
6.0
9.6
8.8
2.6
4.8
5.3
23.6
12.9
14.1
19.9
12.0
12.4
SAIL
66
60
Hold
27261
5.1
4.8
6.2
13.0
13.6
10.6
11.8
9.7
6.5
4.0
4.4
6.0
4.9
4.5
5.6
114
135
Hold
33757
19.8
16.9
22.6
6.6
7.7
5.8
4.8
5.0
4.4
11.3
10.0
10.7
11.8
10.3
11.1
Tata Steel
240 250 Hold
Source: Company, ICICIdirect.com Research
23314
NM
20.0
23.0
NM
12.0
10.4
7.6
7.9
6.3
5.8
5.3
6.9
0.0
5.6
6.3
Vedanta
Page 8
RATING RATIONALE
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
Page 9
ANALYST CERTIFICATION
We /I, Dewang Sanghavi, MBA (FIN) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views
about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking
and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and
has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of
which are available on www.icicibank.com.
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participate in virtually all securities trading markets in India. We and our associates might have investment
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It is confirmed that Dewang Sanghavi, MBA (FIN) research analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.
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