Buy NMDC\, target price Rs 120: Motilal Oswal

Motilal Oswal has given buy rating to NMDC with a target price of Rs 120. The share price moved up by 2.18 per cent from its previous close of Rs 84.90. The stock’s last traded price is Rs 86.75.

NMDC Ltd., incorporated in the year 1958, is a Large Cap company (having a market cap of Rs 26576.86 Crore) operating in Mining sector.

Financials
For the quarter ended 31-03-2020, the company reported a Consolidated sales of Rs 3187.34 Crore, up 6.02 % from last quarter Sales of Rs 3006.38 Crore and down -12.52 % from last year same quarter Sales of Rs 3643.32 Crore. The Company reported net profit after tax of Rs 347.00 Crore in latest quarter.

Investment Rationale
The brokerage expects NMDC’s EBITDA to decline at a 13% CAGR to INR47.2b over FY20–22E, weighed by likely flat volumes and 14% lower blended iron ore realization during this period. The company, however, has a few optionalities that are not being priced-in currently: (1) any favorable decision on the Donimalai mine in Karnataka would increase volumes by ~20% and (2) the planned divestment of the 3mtpa Nagarnar steel plant would unlock value (~INR55/sh book value). Also, the stock provides dividend yield of ~6.5% at current prices. The brokerage values the stock at INR 120/share on an SOTP basis – 5x FY22E EV/EBITDA for its core iron ore mining business and 50% of the book value for the Nagarnar plant.

Promoter/FII Holdings
Promoters held 69.7 per cent stake in the company as of June 30, 2020, while FIIs held 5.4 per cent, DIIs 20.4 per cent and public and others 4.6 per cent.