NMDC cuts iron ore prices by Rs100 per tonne



Source: INDIA INFOLINE NEWS SERVICE

NMDC has announced that they would be reducing iron ore prices by Rs100 per tonne for both iron ore lumps and fines. NMDC has reduced lump iron ore prices by 3.3% to Rs2,900 per tonne and also reduced iron ore fines prices by 3.8% to Rs2,560 per tonne. This price is the first price cut taken by NMDC in CY18.

International iron ore prices have remained weak over the past few weeks due a multitude of reasons. After US President Doanld Trump announced tariffs on steel imports, international iron ore prices have corrected by ~18%. While the tariffs on US steel imports have been diluted to a large extent, iron ore markets would remain weak in the face of excess supply in China. Going forward we believe that iron ore prices would remain soft in the near term. We believe this would reflect in NMDC taking more price cuts in the next few months.

NMDC, an iron ore mining company, would see revenue CAGR of 9.2% over FY18-20E aided by (a) 5% CAGR in iron ore shipments supported by rise in domestic steel production. EBITDA margin is expected to expand by 270bps due to higher shipments and firm realisations. We expect PAT CAGR of 12.4% over FY18-20E, with an EBITDA margin of 45.2% in FY20E. The stock is currently trading at 9.1x FY20E EPS.

NMDC has an iron ore mining capacity of 48mtpa. The iron ore mining operations are based out of Kirandul and Bacheli in Chhattisgarh and Donimalai in Karnataka. The company has stated a medium term plan to expand its iron ore mining capacity to 67mtpa by FY22. NMDC also has international mining interests in Tanzania and Australia. However, both of these initiatives are still in the exploration phase. The company also has an under-construction 3mtpa steel plant in Chhattisgarh, which it plans to sell. The production for FY18 stood at 35.5mn tonnes, up 4.4% yoy.

Source: INDIA INFOLINE NEWS SERVICE