NMDC Ltd, a Navratna PSU company engaged in industrial minerals, has announced its first bonus issue in 16 years. NMDC is set to reward investors with 2 free shares for 1 existing equity share to eligible shareholders. Ahead of the bonus issue allotment, brokerage Elara Capital has recommended ACCUMULATE on NMDC for an attractive target of Rs 267, which signals a potential 22% upside in the coming months.
NMDC Ltd Share Price:
Last week, on November 14, NMDC stock ended at Rs 218.85 apiece, down by 1.93% on BSE, with a market cap of Rs 64,136.31 crore. The stock's 52-week high and low is at Rs 286.35 apiece and Rs 166.70 apiece respectively. YTD, NMDC stock has gained by 8.50%.
NMDC Ltd Bonus Issue:
NMDC has announced the issuance of Bonus Shares to the shareholders of the Company in the ratio of 2:1, i.e. 2 (two) Bonus Equity Shares of face value ₹1/- each fully paid up; for every 1 existing equity share of face value of ₹1/- each fully paid up, to the eligible members of the Company as on the record date, subject to the approval of the Shareholders of the Company.
This will be the second bonus issue by NMDC, however, the first in 16 years. The last time NMDC sanctioned bonus shares to investors was in May 2008, also in the ratio of 2:1.
Elara Capital Recommends ACCUMULATE:
As per Elara's note, NMDC (NMDC IN) reported mixed results, largely in line with its net sales estimates but EBITDA below its Consensus estimates, dragged by higher-than-expected operating costs.
In Q2FY25, NMDC posted a 17% surge in net profits to Rs 1,195.63 crore compared to a profit of Rs 1,024.86 crore in Q2FY24. Further, the company recorded a 22.54% rise in revenue from core operations to Rs 4,918.91 crore, as against revenue of Rs 4,013.98 crore a year ago same period.
Furthermore, Elara took note of NMDC's bonus issue announcement. Elara said, "Bonus issue is likely to raise paid-up share capital from the current ~ INR 2,931mn to ~INR 8,792mn."
Also, Elara pointed out that Q3FY25 to date average iron ore prices are up ~13% vs Q2FY25 average. On October 1, 2024, NMDC increased the prices of its lumps and fines to Rs 400 per tonne, followed by another price increase of Rs 600 per tonne for lumps and Rs 400 per tonne for fines on 23 October.
On the valuation, Elara's note said, "We expect these higher prices to bolster margin. Further, better demand should support volume growth. So, we reiterate Accumulate. We raise EBITDA by ~2% for FY25E and ~1% for FY26E while retaining it for FY27E. Further, we roll over to September 2026E from June 2026E. As a result, we increased our TP to INR 267 from INR 251 (post bonus share INR 89) based on 6x (unchanged) September 2026E EV/EBITDA. Sub-par demand and fall in iron ore prices are key risks to our call."
About NMDC Ltd:
National Mineral Development Corporation (NMDC), a Navratna Public Sector Enterprise under the Ministry of Steel, Government of India is the single largest producer of iron ore in India. It owns and operates highly mechanized iron ore mines in Chhattisgarh and Karnataka and has its registered office in Hyderabad, Telangana. NMDC is considered to be one of the low-cost producers of iron ore in the world. It also operates the only mechanized diamond mine in India at Panna, Madhya Pradesh.
The Company is producing about over 45 MTPA of iron ore from its major iron producing units i.e. from Bailadila Sector in Chhattisgarh and Donimalai in Bellary-Hospet region in Karnataka. NMDC envisages to have an iron ore production capacity of 100 MNT by FY30.
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