NMDC stock falls 6% as firm cuts iron ore price amid weak sales

Shares of NMDC fell over 6 per cent today after the government-owned miner cut prices of iron ore amid a weak demand environment. Kotak Institutional Equities assigning a 'reduce' call to the stock also affected investor sentiment.

NMDC stock slipped 6.65 per cent to an intraday low of Rs 101.75 on BSE.  Shares of NMDC are trading lower than 5-day, 20-day, 50-day, 100-day and 200-day moving averages. Later, the stock ended 5.28 per cent lower at Rs 103.25 on BSE.

The stock has lost 37.62 per cent in a year and fallen 22.50 per cent in 2022. Total 18.08 lakh shares changed hands amounting to a turnover of Rs 18.71 crore on BSE.

Market cap of the firm fell to Rs 30,273 crore. The stock was trading nearly 1 per cent higher compared to its 52-week low of Rs 101.75 on BSE.

The firm said prices of iron ore with effect from July 12, 2022 have been fixed for lump ore at Rs 3,900 per tonne and fines at Rs 2,810 per tonne.

This is the third instance of the company cutting prices after the government raised export duty on all grades of iron ore to 50 per cent in May-end.

Global iron ore prices have been falling on fears of weak demand for the raw material in China as steel mills in the neighbouring country are suffering losses and hence cutting production.

Meanwhile, Kotak Institutional Equities assigned reduced call for the stock with a target price of Rs 105. The brokerage said NMDC has cut its prices by 36 per cent in May-June 2022 on imposition of export duty.

"We expect further weakness given a 20 per cent correction in seaborne iron ore prices in the past one month," Kotak Equities said.

"Sales volumes have significantly contracted in 1QFY23, led by destocking by consumers and likely to recover in 2HFY23E. We believe recent stock underperformance captures sharp margin contraction from 2QFY23E onwards," the brokerage added.

Of late, the firm has seen a decline in sales, which is a key factor behind the price cut move for iron ore.

NMDC logged a 14 percent decline in its iron ore output at 2.57 million tonne (MT) in June 2022 against 2.98 MT on a year-on-year basis  (y-o-y).

In June 2022, the company's sales fell to 1.90 MT, from 3.18 MT in June 2021, a year-on-year fall of 40 percent.

The company's output from mines in Chhattisgarh was flat during June at 1.94 MT. The output from Karnataka mines fell to 0.63 MT as compared to 1.04 MT in June 2021.

The sales of minerals produced from Chhattisgarh shrank to 1.58 MT as against 2.22 MT in June last year.

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