Revenue growth for Q2FY18 was Rs 2,421 Cr an increase of 39% YoY. However, the company reported a 10% YoY increase in Profit after Tax for Q2FY18 as realizations for iron ore moved markedly lower. Sales and production volumes increased by 4% and 14% YoY respectively as the domestic steel production environment improved.
NMDC Limited is an India-based company engaged in mining of iron ore and has produced 36MT in FY17. The company has three fully mechanised mines viz., Bailadila Deposit–14/11C, Bailadila Deposit–5, 10/11A (Chhattisgarh) and Donimalai Mines (Karnataka).
Indian iron ore industry is expected continue its growth trend over FY17-19E (20% in FY15-17). We see robust steel capacity expansion in the country to lift volumes for the company. In addition, company plans to raise its capacity by 34MTPA to 50MTPA by FY19E. Thereby, we expect revenue to reach 11% CAGR over FY17-19E. We expect recent price revisions and robust volume growth to aid margin expansion of 1100 bps to 52% by FY19E. Going ahead we see cash flow accretion to be hindered due to expansion commitments. However, considering heavy capacity expansion and strong margin growth we see bottom-line to post 18% CAGR over FY17-19E.
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