NMDC Ltd, a Navratna PSU company, is going to reward investors with 2 bonus shares on the existing 1 piece. This will be the company's first bonus issue in 16 years. Going ahead, the outlook of NMDC remained strong in the second half of FY25. Accordingly, brokerage Antique Stock Broking has suggested BUY for a target price of Rs 294.
NMDC Share Price:
After market hours of November 19, NMDC stock ended at Rs 221.15 apiece, down by 0.72% on BSE, with a market cap of Rs 64,810.35 crore. The stock's 52-week high and low is at Rs 286.35 apiece and Rs 167.30 apiece. The stock has a stable return on equity of 22.01%. YTD, the stock zoomed by 10% on BSE so far.
BUY NMDC Stock:
Brokerage Antique Stock Broking favour the company's net cash position and capacity expansion plans to support higher volume offtake. It has factored in 10%/ 4%/ 3% lower sales volume leading to 10%/ 4%/ 4% reduction in FY25/ 26/ 27 EBITDA.
The brokerage pointed out that NMDC's management had earlier guided for FY25 production of 50 MT (11% higher YoY; 1HFY25 stood at 17.5 MT, implying 2HFY25 production to be at 32.5 MT) and FY26 production target of 54 MT with the long-term intent of touching 100 mtpa by FY31. Management had earlier expected NMDC Steel to break even by 3QFY25.
Further, the brokerage stated hat NMDC's current prices are close to the long-term average discount levels to global import parity iron ore prices and are expected to stay supported at current levels.
Moreover, the brokerage expects the slurry pipeline to be fully operational by mid-CY26. I said, "We expect the dividend yield to sustain at ~4% over FY25-26."
On the valuation, Antique's note said, "We favour strong operational capacity, net cash position, capacity expansion plans (100 mtpa capacity by FY30 and long-term target of 10%-15% of revenue from non-iron ore segments like gold, magnetite, and lithium mining prospects in Australia). We maintain a BUY rating with a TP of INR 294 at a target multiple of 6x FY27E EV/EBITDA."
NMDC 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.
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.
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