Motilal Oswal has given Buy recommendation for NMDC recommended buy rating on the stock with a target price of Rs 220 in its research with a target price of Rs. 220 in its research report issued on Apr 12, 2022

Motilal Oswal’s research report on NMDC

After posting the highest ever annual production of iron ore (at 42mt) in FY22, NMDC has raised the bar and is now aiming at 46mt for FY23E and even higher for FY24E. The growth will be driven by both Chhattisgarh and Karnataka sectors. The Nagarnar Iron and Steel Company (NISP) steel plant is nearing commissioning and we expect the same to be completed by end-2QFY23/early-3QFY23. The company is working on the demerger of the steel plant in parallel and is likely to complete the process in 2QFY23/early-3QFY23. With more iron ore mines being put on auction and steel companies achieving self-sufficiency, the long-term approach of the government to tax iron ore exports (to discourage the same) may warrant a second thought. This can trigger a re-rating of NMDC as it plans to increase its capacity to 70mt in the near term. The stock is trading at 3.4x our FY23E EV/EBITDA, excluding the book value of the steel plant. We raise our SoTP-based TP to INR220 (from INR200) valuing NMDC’s: (a) mining business at 5x FY23E EV/EBITDA and (b) steel plant CWIP at 75% of the total capex (from 50% earlier). Our FY23 iron ore fines assumption is at a 10% discount to the CMP. Maintain BUY.

Outlook

Our SoTP-based TP of INR220 (up from INR200) comprises: a) INR173 for the core iron ore mining business, factoring in a lower ASP v/s the CMP – valuing at 5x FY23 EV/EBITDA and (b) INR47 for the steel CWIP at 25% discount as the commissioning is likely to happen in FY23 itself.

More Info

At 18:30 hrs NMDC was quoting at Rs 169.70, down Rs 0.00, or 0.00 percent.

It has touched an intraday high of Rs 173.90 and an intraday low of Rs 167.50.

It was trading with volumes of 0 shares, compared to its thirty day average of 714,402 shares, a decrease of -100.00 percent.

In the previous trading session, the share closed down 2.42 percent or Rs 4.20 at Rs 169.70.

The share touched its 52-week high Rs 213.15 and 52-week low Rs 127.80 on 12 May, 2021 and 20 December, 2021, respectively.

Currently, it is trading 20.38 percent below its 52-week high and 32.79 percent above its 52-week low.

Market capitalisation stands at Rs 49,732.38 crore.

Leave a Reply

Your email address will not be published.