NMDC is India's largest iron -ore producer with 3 crore tonnes of annual extraction capacity and rich iron-ore reserves and resources of 136 crore tonnes. It has three fully operating mines located in Chhattisgarh & Karnataka, having a total proved reserve of around 80 crore tonnes. Debt free mining company sitting on huge cash Rs. 20,725 core on will provide leverage to explore and develop new mines both India and globally.
Investment Arguments
# NMDC - One of the Best Players in Mining
# Quality resources in kitty
# High margin backed by low cost of production
# Diversifying Product Portfolio
# Huge Cash in Balance sheet will help company to grow inorganically
Company DescriptionNMDC Ltd engages in the exploration and production of various minerals in India & internationally.
It explores for iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, & beach sands. The NMDC also focuses on coal & gold properties, as well as platinum group of elements and bauxite.
It has interests in Bailadila iron ore deposits in Chhattisgarh, as well as Donimalai iron ore mines in Karnataka; diamond mine in Panna, Madhya Pradesh; magnesite mine in Jammu; and Arki lime stone project in Himachal Pradesh.
In addition, the company involves in developing a steel plant at Jagdalpur, as well as pellet plants in Donimalai and Bacheli; and invests in the development of renewable energy resources, which include a wind mill project of approximately 10.5 MW capacity in Karnataka.
It was formerly known as National Mineral Development Corp.Ltd., and changed its name to NMDC Limited in January, 2008.
Valuations
With strong domestic demand, we expect NMDC's volumes to grow at 6 to 8% CAGR during F11-F14 e. On EV/EBITDA, it trades at 5x F13e and 4.8x F14e and EV/Sales, it trades at 3.8x FY13e and 3.6x FY14e.
Anand Rathi feel at the current valuation, the stock is undervalued with its peers and the company should command a premium, given its cost, high ROE, debt free, market leadership in the domestic iron-ore space, huge cash balance and high margins.
Anand Rathi assign the price target of Rs. 230 based on relative valuation in next 12-15 months
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Review by Anand Rathi
A. K. PrabhakarSenior Vice President - Equity Research
Investment Arguments
# NMDC - One of the Best Players in Mining
# Quality resources in kitty
# High margin backed by low cost of production
# Diversifying Product Portfolio
# Huge Cash in Balance sheet will help company to grow inorganically
Company DescriptionNMDC Ltd engages in the exploration and production of various minerals in India & internationally.
It explores for iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, & beach sands. The NMDC also focuses on coal & gold properties, as well as platinum group of elements and bauxite.
It has interests in Bailadila iron ore deposits in Chhattisgarh, as well as Donimalai iron ore mines in Karnataka; diamond mine in Panna, Madhya Pradesh; magnesite mine in Jammu; and Arki lime stone project in Himachal Pradesh.
In addition, the company involves in developing a steel plant at Jagdalpur, as well as pellet plants in Donimalai and Bacheli; and invests in the development of renewable energy resources, which include a wind mill project of approximately 10.5 MW capacity in Karnataka.
It was formerly known as National Mineral Development Corp.Ltd., and changed its name to NMDC Limited in January, 2008.
Valuations
With strong domestic demand, we expect NMDC's volumes to grow at 6 to 8% CAGR during F11-F14 e. On EV/EBITDA, it trades at 5x F13e and 4.8x F14e and EV/Sales, it trades at 3.8x FY13e and 3.6x FY14e.
Anand Rathi feel at the current valuation, the stock is undervalued with its peers and the company should command a premium, given its cost, high ROE, debt free, market leadership in the domestic iron-ore space, huge cash balance and high margins.
Anand Rathi assign the price target of Rs. 230 based on relative valuation in next 12-15 months
.
Review by Anand Rathi
A. K. PrabhakarSenior Vice President - Equity Research
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