Value Pick: Brokerages bullish on NMDC; know what makes it a perfect bet?

State-owned NMDC Limited is a favourite bet for many brokerage houses. An upside of up to 49 per cent in the stock is seen as company may benefit from the rising metal prices amid the ongoing Russia-Ukraine crisis. 

ICICI Securities 

Technically, the stock has witnessed a Change of Polarity as a major long term supply line resistance joining highs since CY14 has reversed its role post a breakout in April 2021 and is acting as a support, signalling positive bias.

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It has managed to hold above upward sloping support trend line joining lows since March 2020, highlighting elevated buying demand signifying inherent strength.  The stock is seen rebounding after a higher base at the 52 weeks EMA currently placed at Rs 138 per share.         

During Q3FY22, NMDC reported iron ore sales volume of 9.8 MT, up 6 per cent year-on-year and and 9 per cent quarter-on-quarter. EBITDA/tonne for Q3FY22 came in at Rs 2654/tonne as compared to EBITDA/tonne of Rs 2975/tonne in Q3FY22 and Rs 3488/tonne in Q2FY22.  

For Q3FY22, the revenue from operations was at Rs 5874 crore, up 35 per cent YoY but down 14 per cent QoQ. EBIDTA for the quarter was at Rs 2611 crore, down 6 per cent YoY and 16 per cent QoQ. It sees the stock moving 12 per cent to a target price of Rs 166 per share and stop loss of 122 apiece.  

Antique Stock Broking 

International iron ore prices have jumped around 43 per cent to US $144/tonne over the past three months after the sharp decline witnessed in November-21. Similarly, concerns on 70MT of iron ore exports from Russia and Ukraine have supported the price outlook.  

Management expects to commission the steel plant by July-22 and complete the de-merger process by H1FY23. De-merger would improve the return ratios and enable the company to focus on the core mining business and NMDC would be supplying around 4.5MTPA of iron ore at arm's length to the de-merged steel plant 

The brokerage We maintain Buy rating on the stock with a target price of Rs 226 per share (49 per cent upside) at a target multiple of 5.0x FY24E EV/EBITDA and adding the steel CWIP@0.3x book. Higher domestic steel production, discount to international ore prices and steady domestic steel prices would support domestic iron ore prices. 

Nomura 

The largest iron ore producer in India raised its prices by Rs 400/tonne and Rs 300/tonne for lumps and fines in February-22, respectively. Iron ore lumps/fines prices currently stand at Rs 5,600/tonne; Rs 4,560/tonne vs Rs 5,200/tonne; Rs 4,260/ tonne for lumps/fines in January-22. 

Among key states, iron ore prices in Karnataka declined 10.3per cent month-on-month in January-22, while prices in Odisha declined around 10 per cent MoM in November-21. Prices in Chhattisgarh rose 7 per cent MoM in February-22. 

Kotak Institutional Equities 

Kotak Institutional Equities is also bullish on this counter and sees an upside of 26 per cent to Rs 190 per share, with a stop loss of Rs 151 per share. The stock on Thursday gained over 1 per cent to Rs 152.8 per share on the BSE as compared to 0.66 per cent fall in the S&P BSE Sensex.