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Business News/ Markets / Stock Markets/  NMDC share price rises 1.7% encouraged by the strength in global iron-ore prices
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NMDC share price rises 1.7% encouraged by the strength in global iron-ore prices

Stock Market Today- Analysts at Prabhudas Lilladher said that they have raised FY25 Ebitda estimates by 9% on expectation of price hikes in second half as global iron ore prices are hardening, domestic steel demand remains strong and NMDC has not taken effective price hikes since May’23

NMDC - Strngthening global iron prices, strong steel demand are improving its earnings outlookPremium
NMDC - Strngthening global iron prices, strong steel demand are improving its earnings outlook

NMDC Ltd share price gained up to 1.72% on Thursday during intraday trades on the BSE. The stock has seen a rise close to 40% since end August, is trading near 52 week highs. 

The rise in international iron-ore prices is boosting investor confidence towards country's largest iron-ore producer. The international iron-ore prices Ex-China that were close to $105 a tonne in August have risen to around $130 a tonne levels now. NMDC also had hiked prices for its output in October and can see more rate hikes feel analysts

Notably the iron-ore demand in the country also remains strong led by strong Steel demand. The NMDC sales volume in October at 3.44 million tonne (mt) came much higher than 3.04 mt in October’2022. Cumulative April-October sales volume at 23.99 mt came 23.4% higher compared to 19.44 mt in the year-ago period. The higher iron-ore prices and higher volumes bode well for earning prospects of NMDC.

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NMDC already had reported a good September quarter performance. NMDC’s Earnings before interest tax depreciation and amortization (Ebitda) grew almost 40% year-on-year. The adjusted net profit had risen 28.3% year-on-year. On a sequential basis, however, the performance was weaker owing to seasonal weakness led by the onset of monsoon. The realisations also had fallen owing to frontloading of price cuts ahead of monsoon. Nevertheless price cuts and weaker pricing scenario is now behind and analysts expect the earnings growth for NMDC being much stronger

Analysts at Prabhudas Lilladher said that they have raised FY25 Ebitda estimates by 9% on expectation of price hikes in second half as global iron ore prices are hardening, domestic steel demand remains strong and NMDC has not taken effective price hikes since May’23. Ebitda stands for Earnings before interest tax depreciation and amortisation. They expect Revenue, Ebitda and net profit growth of 12% 15% and 14% over FY23-26.

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Analysts at Sharekhan also have maintained positive ratings on NMDC based on strong domestic steel demand that bodes well for volume growth of NMDC, which would be the key earnings growth driver over FY24- 26. Moreover, analysts at Sharekhan say that post demerger of the steel business will reduce capital intensity and improve dividend payout ratio. Apart from attractive valuations (3.8 times its FY2026 estimated Enterprise value by Ebitda and 1.4 times its FY25 estimated price by Book Value) the stock offers a healthy dividend yield of 6%. NMDC has a high cash of Rs. 13,919 crore which is 28% of its current market capitalisation and the same provide comfort to investors, sadi analysts at Sharekhan.Also 

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ABOUT THE AUTHOR
Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 23 Nov 2023, 03:55 PM IST
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