NMDC (Q2 FY13)
Topline for the quarter declined 14.7% yoy to Rs26.1bn as the impact of higher realisations was offset by lower volumes. The company’s iron ore sales volume declined 22.8% yoy to 5.9mn tons due to low off-take by customers and heavy rainfall. On a qoq basis, sales volume decreased 14.6% qoq. Production too declined 22.8% yoy basis to 5.4mn tons, touching its two year low. Blended realizations for the quarter was higher by 10.4% yoy and 7.7% qoq at Rs4,462/ton, inline with our estimate. The company at the start of the quarter had announced a price increase of 13% qoq for iron ore lumps and 8% for iron ore fines. After taking price cuts of 2% for lumps and 11% for fines in October, the company has announced price cuts of 11% for lumps and 3% for fines in November.
NMDC’s quarterly performance
|Q2 FY13||Q1 FY13||% qoq||Q2 FY12||% yoy|
|Production volumes (mn tons)||5.4||7.0||(22.8)||6.1||(11.1)|
|Sales volume (mn tons)||5.9||7.6||(22.8)||6.9||(14.6)|
Operating profit of Rs19.3bn was lower by 20.6% yoy and 16% qoq. It was also lower than our estimate of Rs23.1bn largely on account of lower volumes. EBIDTA/ton declined marginally from Rs3,358/ton in Q1 FY13 to Rs3,305/ton due to a jump in freight costs. The company had imported some iron ore leading to an increase in iron ore transportation costs. Costs per ton of ore increased sharply from Rs785/ton in Q1 FY13 to Rs1,157/ton during the quarter. On a yoy basis, EBIDTA/ton was higher as the impact of higher costs was more than offset by strong realizations.
We revise estimates over the next two years incorporating the decline in global iron ore prices and slower growth in volumes. The company’s performance has been consistently impacted by the Maoist activities in Chattisgarh. In addition to this, the ramp up in Karnataka has been slower than expected. We now estimate FY13 volumes to be 27.1mn tons and FY14 at 30mn tons. We believe the company would continue to report strong earnings over the next two years and maintain our BUY rating with a 9-month price target of Rs208.
|(Rs mn)||Q2 FY13||Q2 FY12||% yoy||Q1 FY13||% qoq|
|OPM (%)||74.1||79.5||(545) bps||81.0||(697) bps|
|Effective tax rate (%)||32.4||32.4||32.4|
|Adj. PAT margin (%)||64.3||64.1||16 bps||67.1||(284) bps|
|Ann. EPS (Rs)||16.9||19.8||(14.5)||19.2||(11.9)|
|Y/e 31 Mar (Rs m)||FY11||FY12||FY13E||FY14E|
|yoy growth (%)||82.2||(0.9)||4.6||5.5|
|yoy growth (%)||88.2||12.6||5.4||4.9|
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