NMDC share price jumps over 5% to hit a 52-week high on iron ore price revision; brokerages see further upside
NMDC share price rises over 5 per cent on upward revision in iron ore prices. It is up almost 63 per cent in the last one year. ICICI Securities upgrades stock to buy with a target price of ₹180.
PremiumNMDC share price jumped over 5 per cent to hit its fresh 52-week high of ₹150 on BSE in intraday trade on Thursday after an upward revision in iron ore prices. The stock opened at ₹142.90 against the previous close of ₹142.25 and rose 5.45 per cent to its one-year peak of ₹150.
In a BSE filing on Thursday (September 14), the State-owned company, which is also the country's largest iron ore miner, said that the prices of iron ore with effect from September 14, 2023, has been fixed at ₹4,950 per tonne for lump ore and at ₹4,210 per tonne for fines.
"The prices are inclusive of royalty, DMF, NMET and exclusive of cess, forest permit fee, transit fee, GST, environmental cess and other taxes," the company said.
Lump ore or high-grade iron contains 65.53 per cent Fe (iron), while fines are inferior grade ore with 64 per cent and less Fe content.
In the last price revision announced on August 15, NMDC had fixed the rate of the lump at ₹4,650 per tonne and that of fines at ₹3,910 a tonne with immediate effect.
Iron ore is one of the key raw materials used in the manufacturing of steel. A change in iron ore prices directly impacts the rates of steel, an alloy widely used in sectors such as automobiles, infrastructure, construction and railways.
NMDC aims to clock sales volume in the range of 47-49 million tonnes this fiscal year. As Mint reported earlier, in the first five months of FY24 (5MFY24), NMDC’s sales volume stood at 17.4 million tonnes, up by nearly 30 per cent year-on-year. This means for the rest of FY24, the company needs to clock a relatively slower growth of about 23 per cent to meet the mid-point of its guided range.
Read more: NMDC’s sales volume on track, but the problem is ore prices
Shares of NMDC have clocked sharp gains in the last one year, jumping almost 63 per cent. Equity benchmark Sensex has gained just about 12 per cent in the same period.
Brokerage firm ICICI Securities believes the stock can rise even further.
The brokerage firm has upgraded the stock to a buy from an add and raised the target price to ₹180 from ₹130 earlier.
ICICI Securities believes NMDC is likely to show robust volume growth as the focus returns to the mining business post-steel plant demerger.
"We upgrade NMDC to a buy from an add as (1) Sales volume in FY24E may breach the 32-40mnte range; (2) long-term volume visibility is clearer as the roadmap for 100mtpa by FY30, though aspirational, is being worked on; (3) commercial mining in Odisha is progressively getting undermined, resulting in more opportunity; and (4) RoE (return on equity) may improve further from the current level of 22 per cent as mining business takes the centre stage and steel plant is demerged," the brokerage firm said in a report on September 13.
"Taking cognisance of the sales volume until Aug’23 and favourable price outlook, we raise our FY24E and FY25E EBITDA by 22 per cent and 38 per cent, respectively. Furthermore, we raise EV/EBITDA multiple to 5.5 times (earlier 5 times) in view of robust volume trajectory in future," the brokerage firm added.
NMDC reported a 13 per cent rise in its consolidated net profit to ₹1,661.04 crore for the April-June quarter of FY24, boosted by higher income. Its total income surged to ₹5,688.87 crore from ₹4,913.06 crore in the corresponding period a year ago.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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