Multi bagger stock: NMDC rises over 5% in trade; here is why

Shares of NMDC climbed over 5 per cent in Tuesday's (April 23) trade after domestic brokerage LKP Securities initiated coverage on the stock with a 'buy' rating for a 12-month target price of Rs 297 apiece.

"We initiate NMDC at 6.5x FY26E EV/EBITDA... Over FY24E-26E we expect NMDC to clock a Revenue/EBITDA/PAT CAGR of 12.9 per cent/18.8 per cent/19.1 per cent respectively," the report read.

At around 2:47 p.m., shares of NMDC traded 5.25 per cent, or Rs 12.3, higher at Rs 246.8 apiece. The market capitalisation of the company at around the same time stood at Rs 72,327.35 crore. 

LKP is upbeat on NMDC for the following reasons: 

>>NMDC stands to capitalise on rising steel demand as India’s steel industry doubles by 2030. 

>>This PSE is poised to be a key beneficiary of a potential repeat of the 2003-2007 capex boom, given the resemblance of the current economic landscape to that of 2003-2008. 

>>Aggressive mine capacity expansion to meet upcoming demand. >>Abundant availability of high-quality ores for the next 40 years.

Furthermore, from an industry point of view too, NMDC looks attractive to the brokerage as it expects the onset of key structural changes in the economy and a decade-long investment cycle triggered largely by the government capex to continue and in comparison to its international counterparts, the domestic steel sector stands in a favorable position. 

Moreover, it is projected that the domestic crude steel capacity will hit around 175 MT in FY24, boasting an estimated capacity utilisation rate of approximately 82 per cent. This translates to an anticipated iron ore requirement of roughly 282 MT in FY24E with NMDC commanding around a 16 per cent market share.

Additionally, the government’s focus on infrastructure development is driving steel demand, further boosting NMDC’s prospects.

In a year NMDC shares have given a multi bagger return of over 126 per cent against Nifty50's rise of over 26 per cent. 

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