Navratna PSU NMDC's bonus issue is much-awaited as the government-backed company will reward free shares in the ratio of 2:1 after 16 years of gap. The last date to be eligible for NMDC's upcoming bonus is December 27, and accordingly, the stock will be trending. Brokerage Motilal Oswal has recommended BUY for a target price of Rs 280, owing to increasing EC limit to drive volumes. Also, the company's CAPEX will likely support higher volumes in the coming months.
NMDC Ltd Share Price:
Last week, on December 20th, NMDC stock ended at Rs 213.35 apiece, with a market cap of Rs 62,524.48 crore. During the trading week from December 16th to 20th, the stock dropped by 8.6% on the BSE. Meanwhile, YTD, the stock is higher by 6%.
The stock's 52-week high and low is at Rs 286.35 apiece and Rs 179.75 apiece respectively. While its price-to-equity ratio is low at 10.07x, and its return to equity is strong at 22.01%.
NMDC Ltd Bonus Issue:
The Navratna PSU player has declared 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.
For the upcoming bonus, the company declared December 27 as the record date, while the allotment date is fixed on December 30th.
Notably, 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.
Motilal Oswal On NMDC:
According to Motilal Oswal's note, India's crude steel capacity is expected to reach 300mt by FY30-31, which will increase the iron ore requirement to ~435-445mt. As NMDC holds 16% of the market share, we believe it is well placed to capitalize on the opportunities ahead.
During Oct'24, NMDC's total rake movement increased to 506 rakes against 408 rakes in Sep'24. Dispatches to JSTL (Dolvi) for Oct'24 were at 135 rakes (vs. 100 rake in Sep'24) and RINL was 103 rakes (vs. 117 rakes in Sep'24). The combined share of RINL and JSTL in total rake movement stood at ~47% in Oct'24 (vs. 53% in Sep'24), as per the brokerage.
That being said, Motilal highlighted NMDC has planned capex for various evacuation and capacity enhancement projects, which are expected to improve the product mix and increase its production capacity to ~100mt by FY29-30E.
NMDC plans to enhance EC for Kirandul and Bacheli to 30-35mt each in the next 4-5 years. While NMDC has got 1.5mt EC for Kumaraswamy mines and is trying to take 10mt, which will take its total capacity to 64mt by next year. Also, the company is undertaking multiple capex projects to augment ore production, improve the product mix, and enhance mining capacities.
"We reiterate our BUY rating on NMDC with a TP of INR280 (based on 6x Sep'27E EV/EBITDA)," Motilal's note said.
The brokerage also highlighted key risks which could be increasing competition for NMDC - since FY16, +100 iron ore blocks have been auctioned, and when these mines become operational, it would lead to higher supply; 2) NMDC relies heavily on a few customers, which exposes it to business risk.
About NMDC:
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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