Our NMDC valuation throws up range of Rs 173-215/sh:HDFC

MUMBAI: According to HDFC Securities fair valuation for NMDC lies is in the range of Rs 173-215 per share.

“NMDC is the largest Iron ore mining company in India with production volume of ~30 m tons per annum. It is among the lowest cost producers of iron ore in the world with cash cost of $ 9 / ton. Its iron ore reserves are estimated at 1.15 bn tons and are high grade (Fe – 65.7%).

At the CMP, the stock is trading at FY12E EV/EBITDA of 14x and P/E of 20x against average global multiple of 5x and 8x respectively. While NMDC’s operating margins are superior to peers, we believe the valuation premium is also likely driven by global optimism in ore prices and partly fueled by low free float on the stock.

Our valuation of NMDC throws up a range of Rs173-215/share using NPV methodology (Rs173/share), as well as applying a premium of 25% to global peers using FY12E EV/EBITDA multiple (Rs213/share) and P/E multiple (Rs215/share),” the recommendation said.