Home / Markets / Stock Markets /  NMDC, JSW Steel may benefit in medium term: Edelweiss. Check its stance on these 2 metal stocks

The Supreme Court of India has raised the cap on iron ore mining in Karnataka to 50 mt from 35 mt. In brokerage Edelweiss' view, the development is significant as it could prompt iron ore mining companies such as NMDC to ramp up capacity implies additional iron ore security for JSW Steel’s Vijayanagar expansion, and might pave the way for auction of more iron ore mines in Karnataka.

While immediate benefits are unlikely, the development expands the opportunity for both NMDC and JSW Steel to pursue respective expansion plans over the medium term, as per the brokerage. Edelwiess has maintained its ‘Buy’ rating on NMDC shares with a target price of 152 and ‘Reduce’ stance on metal stock JSW Steel with a target price of 471.

“We believe NMDC can now increase the production capacity at both Donimalai and Kumaraswamy. This coupled with the e-auction of iron ore done directly by the company now (and not via the monitoring committee) can improve NMDC’s incremental profitability from the Karnataka sector," the note stated.

In case of JSW Steel, the higher high-grade iron ore availability within Karnataka comes as a shot in the arm for its Vijayanagar operations. Besides, reducing the cost for existing operations, this should allow the company to participate in the auction of category A and B mines in the future and improve its captive iron ore base, it added.

"We perceive the SC’s recent judgement raising iron ore production cap in Karnataka as a welcome step, benefitting all the stakeholders: i) NMDC is likely to gain from higher production cap in Bellary by potentially applying for higher EC limits for both the Donimalai and Kumaraswamy mines; ii) JSW Steel is likely to benefit from higher availability of iron ore for both existing operations and ongoing expansion at Vijayanagar; iii) the Karnataka government can gain from future auctions of category A and category B mines, generating higher royalty," Edelweiss said.

While the brokerage does not see any immediate benefit as regulations will unfold in due course, it does expect gains over medium term for NMDC, the major iron ore producer, and JSW Steel, the major iron ore consumer, in Karnataka.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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