NMDC shares zoomed 103% in a year; brokerage suggests more upside

Shares of state-run NMDC Ltd have rallied 103.08 per cent in the past one year. On Thursday, the stock jumped 7.28 per cent to hit its one-year high level of Rs 252.65. It eventually settled 4.86 per cent higher at Rs 246.95. Turnover on the counter came at Rs 66.67 crore, commanding a market capitalisation (m-cap) of Rs 72,371.31 crore.

Brokerage Nuvama Institutional Equities has given 'Buy' call for NMDC shares with a 12-month target price of Rs 280. During the third-quarter (Q3 FY24), Nuvama said revenue, at Rs 5,410 crore, was up 45 per cent year-on-year (YoY) due to higher volumes and prices.

"Higher revenue amid increased volume and realisation lifted EBITDA (earnings before interest, taxes, depreciation and amortization) to Rs 2,030 crore, up 78 per cent YoY. Other income, at Rs 336 crore, was up 79 per cent YoY with a rise in cash balance. This resulted in a profit of Rs 1,490 crore, up 68 per cent YoY. NMDC has been charged a penalty of Rs 250 crore towards the regularisation of forest land at Donimalai. Adjusting for this, PAT (profit after tax) stood at Rs 1,680 crore, up 89 per cent YoY," it stated.

During April-January 2024, Nuvama said NMDC sold 36.8mt iron ore, up 24 per cent YoY. "With installation of rapid wagon loading system at Chhattisgarh mines, we expect it to sell incremental volume of 4–4.5mt in next two years. This provides confidence on NMDC achieving volume of 50mt in FY25E and 52.3mt in FY26E. We factor in iron ore price decline of INR750-900/t in FY25 from Q4 FY24 average, providing an upside risk to our estimates. Retain 'Buy'," it further underscored.

In Q3 FY24, NMDC has announced its first interim dividend of Rs 5.75 per share. "NMDC has a net cash of Rs 11,500 crore as on Q3 FY24-end. Management has guided the capex of Rs 1,900–2,000 crore in FY24E and Rs 2,200 crore for FY25," Nuvama further mentioned.

On technical setup, The counter traded higher than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-day and 200-day simple moving averages (SMAs).

The stock's 14-day relative strength index (RSI) came at 66.51. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 11.23 against a price-to-book (P/B) value of 2.99.

"One can buy NMDC shares with a stop loss placed at Rs 226. Expected targets would be Rs 250-260," said Rupak De, Senior Technical Analyst at LKP Securities.

As of December 2023, the government holds a 60.79 per cent stake in the PSU.

(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)

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