2:1 Bonus Issue Soon By This Navratna PSU; But, Brokers Give SELL Rating On NMDC Stock, Check New Target Price

NMDC Bonus Issue: Navratna PSU metals and minerals company, NMDC Ltd is among the stocks whose bonus issue rewards are much-awaited. The company is scheduled to reward investors with 2 free shares on the existing 1 piece. However, ahead of the big reward which is after 16 years since its last bonus, NMDC has received a SELL rating on its stock by brokerages like Kotak Institutional Equities and Centrum.

Here's what the brokerages have said about the stock:

According to Kotak Institutional Equities, seaborne iron ore prices have corrected by 10% in the past month partly reversing the late September rally, as the Chinese government has disappointed on stimulus expectations. Iron ore lacks fundamental legs given weak demand in a well-supplied market.

The brokerage highlighted that the focus on NMDC should now revert to its fundamentals and it is expecting seaborne prices to remain under pressure in the near term,

Last month, the company increased the prices of iron ore by a whopping 18% through two hikes. This was due to capitalizing on a tight domestic market due to an extended monsoon and logistic challenges in Odisha. That being said, NMDC's prices are at 48% premium to export parity, much above historic premiums (~30%) and at ~10% discount to import parity versus historic average of ~20%.

Furthermore, the brokerage is expecting domestic steel prices to be under pressure and witness a downward trend due to Chinese prices and pressure from imports. Kotak is predicting Rs1,000/ton lower prices than the spot for 2HFY25E.

Hence, on the valuation of NMDC, Kotak's note said, "We trim our EBITDA estimates by 2%/3% for FY2026/27E on lower domestic prices. Our EBITDA estimates for NMDC are 5%/12%/28% lower than consensus estimates for FY2025/26/27E, led by a combination of lower volumes and prices. Our revised FV of Rs210 (Rs215 earlier) is at 6X EV/EBITDA September 2026E. Maintain SELL."

Meanwhile, brokerage Centrum highlighted that China'a latest stimulus to steer economic growth was short of expectation to lift steel as well as iron ore demand. Hence, it believes the global demand for iron ore to remain muted resulting in subdued price environment in the near term. However, India witnessed strong steel capacity addition which drive strong growth in the domestic market for NMDC.

On the valuation, Centrum's note said, "we baking 7% CAGR growth in sales volume for NMDC over the FY24-FY27E to 54mt and expect Revenue/EBITDA/PAT to grow at 10%/13%/15% CAGR over the FY24-FY27E. However, we believe stock is trading little expensive and thus maintain our sell rating with a revised target price of Rs 200/sh; valuing at 5x H1FY27E EV/EBITDA."

NMDC Ltd Share Price:

After market hours of November 22nd, NMDC share price ended at Rs 220.70 apiece, up by 1.40% on BSE with a market cap of Rs 64,678.47 crore. The stock's 52-week high and low is at Rs 286.35 apiece and Rs 171.05 apiece respectively. The return on equity is 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.

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.