NMDC iron ore production in February up 3.3% y-o-y



Source: INDIA INFOLINE NEWS SERVICE

NMDC Ltd has reported an increase of 3.3% (yoy) in iron ore production for 11MFY18 to 31.32mn tonnes. The increase in production was supported by a 4.5% (yoy) increase in production from the company’s Karnataka unit in the same month. The company’s Chhattisgarh operations also reported a 1% (yoy) increase for the same period.

NMDC had reduced prices of lump ore and fines lower by ~3% on February 1, 2018, in line with international iron ore prices. However, international iron ore prices have moved lower by 3.5% since then. If international iron ore prices decrease further, it is likely that we would see another price cut in April 2018. This would put near-term pressure on the stock going forward.

NMDC is a mining company that operates iron ore and diamond mines across the country. The company 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. It 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 companies are still in the exploration phase. The company also has an under-construction 3mtpa steel plant in Chhattisgarh, which it plans to sell.

We expect the company to report revenue CAGR of 15.1% over FY17-20E aided by (a) ~5% CAGR in iron ore mining production volumes over FY17-20E, and (b) ~6.6% CAGR in realization improvement supported by strong international prices.

Source: INDIA INFOLINE NEWS SERVICE