Cheap valuations, high dividend yield – BUY
NMDC reported a mixed Q4FY13 with revenues surprising positively on higher sales volume and stable realisations, but profits slipping on increased selling expense and higher provisions towards Karnataka mining cases. NMDC announced dividend of Rs 7/sh with dividend yield rising to ~6%, providing support to the stock. We cut FY15 earnings by 10% on lower realisations and higher selling expense, and revise our TP to Rs 175 (from Rs 190). Maintain BUY as risk-reward is favourable and volume ramp-up remains the key trigger.
Revenues surprise on higher volumes: Q4FY13 revenues came in at Rs 32bn (+24% YoY, +56% QoQ), ahead of estimates due to above-expected sales volume at 8.24mt (+55% QoQ, +27% YoY) and stable realisations of Rs 3,899/t (+1% QoQ).
Profitability disappoints on higher selling expense: EBITDA was lower than expected at Rs 17.5bn (-11% YoY, +26% QoQ) with EBITDA margin disappointing at 54.6%. This was largely on account of higher selling and other expenses, along with a one-off of Rs 40bn related to the Karnataka mining ban in Q4FY13. Adjusting for the one-off, EBITDA/t was still low at Rs 2,440/t (-7% QoQ) largely due to higher selling expense at Rs 476/t (+43% QoQ).
Increased dividend a big positive: NMDC has announced dividend of Rs 7/sh (Rs 4/sh in FY12), taking the payout ratio to 41% (from 24% in FY12). We expect dividends to go up in future years and the dividend yield of ~6% should provide further support to the stock.
Maintain BUY: We cut FY15 earnings estimates by 10% on lower realisations and higher selling expense, but maintain BUY as the risk-reward is clearly favourable and volume ramp-up remains the key stock trigger. Our new March’14 TP of Rs 175 is set at 5x FY15E EV/EBITDA. Decline in global prices remains a key risk to our call.
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NMDC reported a mixed Q4FY13 with revenues surprising positively on higher sales volume and stable realisations, but profits slipping on increased selling expense and higher provisions towards Karnataka mining cases. NMDC announced dividend of Rs 7/sh with dividend yield rising to ~6%, providing support to the stock. We cut FY15 earnings by 10% on lower realisations and higher selling expense, and revise our TP to Rs 175 (from Rs 190). Maintain BUY as risk-reward is favourable and volume ramp-up remains the key trigger.
Revenues surprise on higher volumes: Q4FY13 revenues came in at Rs 32bn (+24% YoY, +56% QoQ), ahead of estimates due to above-expected sales volume at 8.24mt (+55% QoQ, +27% YoY) and stable realisations of Rs 3,899/t (+1% QoQ).
Profitability disappoints on higher selling expense: EBITDA was lower than expected at Rs 17.5bn (-11% YoY, +26% QoQ) with EBITDA margin disappointing at 54.6%. This was largely on account of higher selling and other expenses, along with a one-off of Rs 40bn related to the Karnataka mining ban in Q4FY13. Adjusting for the one-off, EBITDA/t was still low at Rs 2,440/t (-7% QoQ) largely due to higher selling expense at Rs 476/t (+43% QoQ).
Increased dividend a big positive: NMDC has announced dividend of Rs 7/sh (Rs 4/sh in FY12), taking the payout ratio to 41% (from 24% in FY12). We expect dividends to go up in future years and the dividend yield of ~6% should provide further support to the stock.
Maintain BUY: We cut FY15 earnings estimates by 10% on lower realisations and higher selling expense, but maintain BUY as the risk-reward is clearly favourable and volume ramp-up remains the key stock trigger. Our new March’14 TP of Rs 175 is set at 5x FY15E EV/EBITDA. Decline in global prices remains a key risk to our call.
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