Major Drilling Group International Inc T.MDI

Alternate Symbol(s): MJDLF

Metals & Mining Industrial Metals & Minerals

Major Drilling Group International Inc. is a Canada-based provider of specialized drilling services primarily serving the mining industry. The Company provides a complete suite of drilling services, including surface and underground coring, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane, shallow gas, underground percussive/long hole drilling, surface drill and blast, a variety of mine services, and ongoing development of data-driven, high-tech drill side solutions. Its mineral drilling services include specialized drilling, conventional drilling, and underground drilling. It maintains field operations and offices in Canada, the United States, Mexico, South America, Asia, Africa, Australia, and Peru. The Company has two categories of customers: junior exploration companies and a diversified portfolio of senior/intermediate companies, for which it provides greenfield exploration drilling and/or drilling at operating mines.

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Major Drilling Group International Inc

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Post by retiredcfon Dec 12, 2022 8:59am

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Post# 35165711

TD 2

The last line was partially cut off. GLTA

Major Drilling Group International Inc.

(MDI-T) C$9.92

Solid Q2 with Strong FCF and Encouraging CY2023 Outlook Event

MDI reported Q2/F23 (ending October 31) EBITDA of $43.0mm, 6.7% above consensus of $40.3mm, but slightly below TD's $44.1mm estimate, with slightly higher-than-expected gross margins offset by higher G&A and incentive compensation.

Impact: SLIGHTLY POSITIVE

In our view, Q2/F23 results were solid, with FCF generation a highlight. Management noted that slight softness in activity levels from the junior miners was offset by increased demand from copper and battery metals customers and recovering demand in South America and Asia. To be clear, MDI's junior customers are still well capitalized and advancing programs, but the industry growth in demand has temporarily slowed given weakness in financing markets across calendar Q2 and Q3. However, we believe the tone around capital raising has incrementally improved in recent weeks.
Revenue increased 18.2% y/y to $201.7mm, 1.5% above TD's $198.7mm estimate. North America continues to be a highlight (+19.8% y/y), with senior/ intermediate activities more than offsetting a slowdown in junior activities. Growth in Australasia & Africa was driven by strength in Asia (new projects, and contract renewals with improved pricing). South/Central America benefited from the resumption of activity in areas previously affected by COVID-19-related lockdowns.
Outlook: MDI is entering its seasonally weak Q3, which is affected by holiday shutdowns. However, management reiterated that customer demand for CY2023 appears strong, with discussions with several senior miners already underway (generally new drill program discussions occur in January). This is consistent with our view that there is a structural need for increased drilling after years of underinvestment and with metal prices at healthy levels, driving positive FCF for seniors/intermediates. We acknowledge that recent inflationary conditions could see new project development decisions deferred; however, we expect preparatory drilling work to continue.

TD Investment Conclusion

Our BUY recommendation and $14.50 target price both remain unchanged. We have made only minor revisions to our model, with the current operating environment largely stable, with healthy demand. We continue to believe that we have entered a new drilling cycle after years of underinvestment by both base and precious metal miners, and we see Major as well-positioned to capitalize, given its strong balance sheet, specialized drilling capabilities, and demonstrated ability to recruit/