1

SYNOPSIS

NMDC Ltd. is only the largest iron ore

producer and exporter; presently

produce about 30 million tons of iron

ore in India.

During the quarter ended, the robust

growth of Net Profit is increased by

19.75% Rs. 18011.50 million.

NMDC Ltd has signed a non-binding

Memorandum of Understanding with

Minemakers Ltd, Australia to

participate in development of the

Wonarah phosphate deposit.

Net Sales and PAT of the company

are expected to grow at a CAGR of

32% and 35% over 2010 to 2013E

respectively.

NMDC signed the contract for Coke

oven Package for the upcoming 3

MTPA Integrated Steel Plant for

Rs.1978.00 crores with the

Consortium lead by M/s Bhilai

Engineering Corporation.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 113689.40 98521.50 64992.20 16.39 13.41

FY 12E 129605.92 113161.75 74863.78 18.88 11.65

FY 13E 145158.63 126396.10 84259.47 21.25 10.35

Stock Data:

Sector: Mining

Face Value Rs. 1.00

52 wk. High/Low (Rs.) 304.90/205.00

Volume (2 wk. Avg.) 53145.00

BSE Code 526371

Market Cap (Rs in mn) 871837.53

Share Holding Pattern

1 Year Comparative Graph

NMDC Ltd. BSE SENSEX

C.M.P: Rs. 219.00 Target Price: Rs. 248.00 Date: Oct. 3rd 2011 BUY

NMDC Ltd. Result Update: Q1 FY 12

2

Peer Group Comparison

Name of the company CMP(Rs.) Market Cap. (Rs.mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

NMDC Ltd. 219.00 871837.53 16.39 13.41 4.54 330.00

20 Microns Ltd. 52.90 75.81 4.71 11.23 1.70 15.00

Sandur Manganese 434.10 379.84 81.73 5.31 1.26 50.00

MOIL Ltd. 274.35 4609.08 30.63 8.96 2.17 0.00

Investment Highlights

� Q1 FY12 Results Update

NMDC Ltd. has reported net profit of Rs 18011.50 million for the quarter ended on

June 30, 2011 as against Rs. 15040.40 million in the same quarter last year, an

increase of 19.75%. It has reported net sales of Rs 27826.10 million for the quarter

ended on June 30, 2011 as against Rs 25179.90 million in the same quarter last

year, a rise of 10.51%. Total income grew by 17.69% to Rs 32244.30 million from

Rs.27398.20 million in the same quarter last year. During the quarter, it reported

earnings of Rs 4.54 a share.

Quarterly Results - Standalone (Rs in mn)

As At June-11 June-10 %change

Net sales 27826.10 25179.90 10.51%

PAT 18011.50 15040.40 19.75%

Basic EPS 4.54 3.79 19.75%

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� Break up of Expenditure

� Signs contract agreement for the Coke Oven complex package

NMDC signed the contract for Coke oven Package for the upcoming 3 MTPA

Integrated Steel Plant at Nagarnar, with the Consortium lead by M/s Bhilai

Engineering Corporation (BEC). The total cost of the package is Rs.1978.00

crores. The Coke Oven Plant will be executed within the overall time frame

of 33 months.

� Signing of MoU with Minemakers Limited, Australia

NMDC Ltd has signed a non-binding memorandum of Understanding (MOU) with

Australian Stock Exchange listed Minemakers Limited to establish the roadmap for

its participation in development of the Wonarah phosphate deposit located in

Northern territory Australia. NMDC proposes to acquire 50% equity in the

Wonarah project and participate in the development of the project. This acquisition

will enable NMDC's entry in Australia's largest known undeveloped phosphate

deposit and contribute towards securing supplies of this critical raw material for

Indian fertilizer industry.

4

Company Profile

National Mineral Development Corporation (NMDC) was incorporated in 1958, under

the administrative control of the ministry of steel. The company is a Government of

India fully owned public enterprise.

The company is involved in the exploration of wide range of minerals including iron

ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnetite,

diamond, tin, tungsten, graphite, beach sands etc.

India's single largest iron ore producer and exporter, presently producing about 30

million tons of iron ore from 3 fully mechanized mines viz., Bailadila Deposit-14/11C,

Bailadila Deposit-5, 10/11A (Chhattisgarh) and Donimalai Iron Ore Mines (Karnataka)

which are awarded ISO 9001-2000 certification. NMDC is presently producing about

22 million tonnes of iron ore from its Bailadila sector mines and 7 million tonnes from

Donimalai sector mines.

NMDC has the only mechanized diamond mine in the country with a capacity of 1.00

lakh carats/annum at Panna (Madhya Pradesh).

An ISO 9001 certified R&D Centre, which has been declared as the "Centre of

Excellence" in the field of mineral processing by the Expert Group of UNIDO.

Moreover, the Company has been categorized by the Department of Public Enterprises

as "NAVRATNA" Public Sector Enterprise in 2008.

The company supplies raw material for three major gas-based sponge iron steel

producers like Essar Steel, Ispat industries and Vikram Ispat. The entire requirement

of the Visakhapatnam Steel Plant is also being met from Bailadila.

NMDC is gearing itself to meet the expected increase in demand for iron ore by

enhancing production capabilities of existing mines and opening up new mines -

Deposit-11B in Bailadila sector and Kumaraswamy in Donimalai sector. The

production capability would increase to around 50 mn tonnes per year by 2014-15.

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Subsidiary company

• J&K Mineral Development Corporation Ltd.

• NMDC-CMDC Ltd.

• NMDC SARL

• Nam-India Minerals Development Corporation (Pty) Ltd.

Joint Venture

NMDC is also in the process of securing mining leases of following iron ore mines

(some as JV with State Governments):

• Sasangada Iron Ore Deposit, Jharkhand

• Ghatkuri Mine, Jharkhand

• Ramandurg, Karnataka

• Deposit – 13, Bailadila, Chhattisgarh

• Deposit-4, Bailadila, Chhattisgarh

Apart from iron ore NMDC is developing Magnetite mine in Jammu and Arki Lime

Stone Project in Himachal Pradesh. Besides iron ore, NMDC also plans to go for other

minerals like Coal, Diamond, gold etc for which NMDC is looking forward for

leases/buy properties from foreign countries directly/under Special Purpose

Vehicle/Joint Ventures.

NMDC is taking up diversification activities through its intensive R&D efforts for

production of High-Tech and High Value added products from Blue Dust like Carbon

free sponge iron powder, Nano crystalline powder.

NMDC is also investing in development of renewable energy resources as an

environment friendly investment. A Wind mill project (10.5MW capacity) has been

completed & commissioned at Karnataka.

6

Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 62390.90 113689.40 129605.92 145158.63

Other Income 8617.10 12057.00 13624.41 14986.85

Total Income 71008.00 125746.40 143230.33 160145.48

Expenditure -18168.60 -27224.90 -30068.57 -33749.38

Operating Profit 52839.40 98521.50 113161.75 126396.10

Gross profit 52839.40 98521.50 113161.75 126396.10

Depreciation -766.20 -1249.80 -1424.77 -1567.25

Profit Before Tax 52073.20 97271.70 111736.98 124828.85

Tax -17600.60 -32279.50 -36873.20 -40569.38

Profit After Tax 34472.60 64992.20 74863.78 84259.47

Equity capital 3964.70 3964.70 3964.70 3964.70

Reserves 138759.60 188180.50 263044.28 347303.75

Face value 1.00 1.00 1.00 1.00

EPS 8.69 16.39 18.88 21.25

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 31-Dec-10 31-Mar-11 30-Jun-11 30-Sep-11E

Description 3m 3m 3m 3m

Net sales 26212.20 37697.50 27826.10 30052.19

Other income 2947.20 4432.80 4418.20 4683.29

Total Income 29159.40 42130.30 32244.30 34735.48

Expenditure -6053.30 -10307.40 -5279.60 -7002.16

Operating profit 23106.10 31822.90 26964.70 27733.32

Gross profit 23106.10 31822.90 26964.70 27733.32

Depreciation -293.90 -420.40 -337.90 -371.69

Profit Before Tax 22812.20 31402.50 26626.80 27361.63

Tax -7631.90 -10416.30 -8615.30 -9029.34

Profit After Tax 15180.30 20986.20 18011.50 18332.29

Equity capital 3964.70 3964.70 3964.70 3964.70

Face value 1.00 1.00 1.00 1.00

EPS 3.83 5.29 4.54 4.62

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Key Ratios

Particulars FY10 FY11 FY12E FY13E

No. of Shares(in mn) 3964.70 3964.70 3964.70 3964.70

EBITDA Margin (%) 84.69% 86.66% 87.31% 87.07%

PBT Margin (%) 83.46% 85.56% 86.21% 85.99%

PAT Margin (%) 55.25% 57.17% 57.76% 58.05%

P/E Ratio (x) 25.29 13.41 11.65 10.35

ROE (%) 24.15% 33.82% 28.04% 23.99%

ROCE (%) 37.56% 51.92% 42.91% 36.43%

EV/EBITDA (x) 16.50 8.85 7.70 6.90

Book Value (Rs.) 36.00 48.46 67.35 88.60

P/BV 6.11 4.54 3.27 2.48

Charts:

Net Sales & PAT

9

P/E Ratio(x)

EV/EBITDA(x)

10

P/BV

Outlook and Conclusion

� At the current market price of Rs.219.00, the stock is trading at 11.65 x FY12E

and 10.35 x FY13E respectively.

� Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.18.88 and Rs.21.25 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 32% and

35% over 2010 to 2013E respectively.

� On the basis of EV/EBITDA, the stock trades at 7.70 x for FY12E and 6.90 x for

FY13E.

� Price to Book Value of the stock is expected to be at 3.27 x and 2.48 x

respectively for FY12E and FY13E.

� We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.248.00 for Medium to Long term investment.

11

Industry Overview

India’s mining industry comprises a large number of small operational mines, which

are primarily involved in the mining of iron ore, coal and bauxite. India is rich in

mineral resources and has large reserves of primary metal ores such as iron ore,

bauxite, chromium, manganese and titanium. India has untapped metal reserves

worth 82 billion tonnes. India is strategically located, with its proximity to developed

European markets and fast-developing Asian markets, to export steel and aluminum.

The value of the total ores and minerals exported from India was estimated to increase

by 14.5 per cent y-o-y in 2009, led (in order of highest value) by cut diamonds,

alumina and chromites. India has abundant iron ore reserves - the fifth-largest reserve

base in the world. India’s iron ore production represents about 10 per cent of total

world production, making it the fourth-largest iron ore producer in world. India is also

the world’s fifth-largest producer of steel and is expected to become the second largest

by 2015, on back of the ongoing capacity additions in the sector.

Metallurgical industries and mining sector has attracted US$ 4 billion and US$ 767.7

million, respectively, in cumulative inflows from April 2000 to September 2010. The

metals and mining sector accounted for 4 per cent of the total foreign direct

investment (FDI) inflow in the country between April 2000 and September 2010.

Under the automatic route for mining of metal ores, including precious metals and

minerals, the Government permits 100 per cent FDI.

__________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

12

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