NMDC Share Price: 3.36% Dividend Yield PSU Navratna Mining Stock Declines For 5th Straight Day; BUY?

The shares of NMDC, India's largest iron ore producer, have extended their bearish streak for the fifth consecutive trading session. In early trade on Tuesday, October 8, NMDC's shares slumped by another 8%, reaching Rs 211 per share, dragging the cumulative loss over the past five days to almost 15%. This extended slide in NMDC's stock price has raised eyebrows, particularly as it comes despite a notable increase in iron ore prices.

The persistent decline in NMDC's share price appears closely tied to the market's reaction to the company's September operational numbers. Despite the company reporting a 1.3% year-over-year increase in iron ore production to 3.04 million tonnes (MT) and a 13.8% growth in sales to 3.54 MT, the stock continues to falter.

This market disillusionment likely stems from investors' expectations being tempered by other external factors, including concerns over the company's margins and profitability as it enters the second half of the financial year.

NMDC recently announced price increases for both lump ore and fines, effective October 1. The price of lump ore has been raised by Rs 400 per tonne, bringing it to Rs 5,750 per tonne, while the price for fines saw a similar increase, rising to Rs 5,010 per tonne.

What's particularly notable is that this recent price increase follows a prior reduction in prices. In its previous adjustment, NMDC lowered the price of lump ore by Rs 600 per tonne to Rs 5,350 and fines by Rs 500 per tonne to Rs 4,610. Despite these upward and downward revisions, it appears that external market forces, including weaker global metal demand, are exerting more influence on the company's stock than these pricing changes alone.

Brokerage firm, Motilal Oswal has provided a rather bleak forecast for metal companies for the second quarter of FY25, with NMDC being no exception. According to the brokerage, metal companies within its coverage are expected to see quarter-on-quarter (QoQ) declines in revenue by 3%, EBITDA by 15%, and adjusted profit after tax by 27%. These downward revisions are largely attributed to weak metal prices and lower sales volumes, factors which are anticipated to negatively impact NMDC's upcoming earnings report.

Additionally, the monsoon season has played a role in weakening domestic demand and pressuring prices. The influx of cheaper Chinese imports has further exacerbated the situation, forcing local players like NMDC to contend with lower average selling prices (ASP). Motilal Oswal reports that NMDC's average prices for lump ore and fines during the second quarter were Rs 5,350 per tonne and Rs 4,610 per tonne, respectively.

The slowdown in China's real estate sector, which consumes a significant portion of global metals, has led to a sharp increase in cheaper Chinese exports flooding international markets. This has added downward pressure on global metal prices, including iron ore. Despite the grim present, there is some optimism that China's anticipated stimulus measures to revive its real estate market could provide support to global metal prices.

On the domestic front, the heavy monsoon season has also been a critical factor in reducing mining volumes. With reduced production capacity due to rain-induced disruptions, NMDC's output has been unable to meet earlier projections. This combination of reduced volume, lower selling prices, and increased global competition has left NMDC in a precarious position as it navigates the remaining quarters of FY25.

As of 10:50 am on Tuesday, NMDC's stock was trading at Rs 220 per share, reflecting a nearly 4% drop from the previous close. This continued downward pressure on the stock suggests that investor confidence remains shaken despite the company's operational improvements and pricing adjustments. The recent sell-off brings the stock's five-day loss to nearly 15%, a steep decline that contrasts sharply with the stock's broader performance over the past year, where it delivered a return of approximately 60%.