Shares of iron ore producer NMDC Ltd have so far gained around 26% in calendar year 2022, outperforming a 20% gain in the Nifty Metal index. One of the reasons why NMDC investors are excited is the multiple price hikes by the company. Including price hike in April, what is the increase in fines and lumpsum prices by NMDC 1,100/ton and 1,200/tonne respectively in CY22 taking their prices up to 5,160/ton and 6,100/tonne now. Thus, analysts expect NMDC earnings to improve after the December quarter (Q3FY22). Nevertheless, the full impact of these price hikes is expected to be visible in the current quarter (Q1FY23).
What’s more, the outlook on prices is bright. Siddharth Gadekar, Analyst, Equirus Securities, said, “Current ore prices are at a 32% discount as compared to the offshore prices. Historically this discount was at 15-20%. Assuming that global iron ore prices are where NMDC is likely to increase prices further.”
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Earlier this month, NMDC revealed the (provisional) physical performance for the year. The company ended FY22 on a strong note, with annual production and sales of 42.15 Million Tonnes (MT) and 40.70MT. “This records the best ever annual physical performance for NMDC,” the company said.
The target for this financial year is high. In a report dated April 12, analysts at Motilal Oswal Financial Services said, “NMDC has guided for 46MT of iron ore production in FY13, we are building in production and sales of 45MT in our estimates. In addition, our price sentiment is 10% lower than the current price, which leaves headroom for both price and volume expansion.”
The brokerage’s Sum-of-Parts based target price for NMDC Stock is 220. In comparison, the shares are trading at approx. 168 on NSE.
Despite its significant gains in CY22, NMDC shares are still down 21% from its 52-week high 213.20 Viewed 12 May 2021.
The delay in commissioning of its Nagarnar steel plant is one factor that has hit sentiments. NMDC will liquidate the plant, which analysts believe will be a trigger for the stock.
“The demerger will improve the return ratio and help the company focus on core mining business and will supply around 4.5 MTPA of iron ore to the demerger steel plant once the NMDC plant grows to full capacity,” a report said. ” By Antique Stock Broking.