The share price of NMDC Ltd gained as much as 1.72% on Thursday during intraday trades on the BSE. The stock has seen an increase close to 40% since late August, trading near 52-week highs.
The rise in international iron ore prices is boosting investor confidence in the country’s largest iron ore producer. International iron ore prices Ex-China, which were near $105 per tonne in August, have risen to around $130 per tonne. NMDC has also raised prices for its output in October and may see more rates feel analysts
Iron ore demand in the country in particular also remains strong led by strong Steel demand. NMDC’s October sales volume at 3.44 million tonnes (mt) was much higher than 3.04 mt in October 2022. April-October bulk 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 NMDC’s earning prospects.
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NMDC has already reported a good September quarter performance. NMDC’s Earnings before interest tax depreciation and amortization (Ebitda) grew nearly 40% year-on-year. Adjusted net profit rose 28.3% year-on-year. On a sequential basis, however, the performance was weaker due to seasonal weakness led by the onset of monsoon. The realizations also fell due to front-loading of price cuts ahead of monsoon. However, price cuts and a weaker price scenario are now behind us and analysts expect the revenue growth for NMDC to be much stronger.
Analysts at Prabhudas Lilladher said they raised FY25 Ebitda estimates by 9% ahead of second-half price expectations as global iron ore prices harden, domestic steel demand remains strong and NMDC has not taken effective pricing since 23 of May Ebitda means Earnings before interest tax depreciation and amortization. They expect growth in Revenue, Ebitda and net profit of 12% 15% and 14% over FY23-26.
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Analysts at Sharekhan have also maintained positive ratings on NMDC based on strong domestic steel demand, which augurs well for volume growth of NMDC, which would be the key earnings growth driver over FY24- 26. Moreover, analysts at Sharekhan say that after demerger of the steel business will reduce capital intensity and improve dividend payout ratio. In addition to attractive valuations (3.8 times its FY2026 estimated Enterprise value of Ebitda and 1.4 times its FY25 estimated price of Book Value) the stock offers a healthy dividend yield of 6%. NMDC has high cash of Rs. 13,919 crore which is 28% of its current market capitalization and the same provides comfort to investors, analysts at Sharekhan said.
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Updated: 23 Nov 2023, 15:55 IST