Maintain outperform on NMDC, target Rs 238
NMDC is the best play on growing shortage of iron ore in India and its move to monthly set in pricing is a good step. With more than 35% of the market cap as cash on books, it looks very attractive to us.
However, we cut our earnings by 7%, 7%, and 5% for FY13e, FY14e, FY15e, respectively. NMDC reported Q2FY13 net profit of R1,680 crore, down 6% from our estimate and 10% below consensus at R1,860 crore as volumes were impacted by monsoon.
Net sales at R2,600 crore was down 15% y-o-y, driven by 23% lower volumes of 0.59 crore tonne affected by monsoon. Ebitda at R1,940 crore was down 21%, as high operational leverage resulted in 39%y-o-y increase in cost/t.
Further, higher export volume (6%) resulted in 3.6x increase in freight costs. Given the miss and regular disappointment, we have cut our volume estimates by 6-8% for FY13-15e, resulting in an EPS cut of 5-7%.
We believe volumes to be strong in H2FY13. NMDC has achieved 1.27 crore tonne in H1FY13, annualising at 2.54 crore tonne. However, we expect H2 to be stronger and NMDC to end
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