2.93% Yield, 575% Dividend Payout Soon: BUY This Navratna PSU For 15-25% Returns Ahead, Turned Ex-Dividend

Navratna PSU, NMDC turned ex-dividend on February 27, and this mining stock ended on a bearish note. NMDC is set to pay dividends up to a whopping 575% soon. The latest pullback in stock price brings the opportunity of buy-on-dips as brokerages like Prabhudas Lilladher, Motilal Oswal and Antique Stock have recommended buying NMDC shares ahead.

There is a potential upside ranging from 15% to 25% in NMDC in the near term.

On its ex-dividend day, February 27, NMDC share price ended at Rs 225.15 apiece, down by 1.8% with a market cap of Rs 65,982.59 crore.

NMDC announced a first interim dividend of Rs 5.75 per share of the face value of Re.1/- each for the financial year 2023-24. Currently, NMDC shares have a dividend yield of 2.93%.

The said Interim Dividend shall be paid/dispatched within the prescribed timelines as per the provisions of the Companies Act, 2013 to those equity shareholders of the Company whose names appear in the Register of Members/records of Depositories as beneficial owners of the equity shares as on Tuesday, the 27th February 2024, which is the Record Date fixed for the purpose.

Meanwhile, in Q3FY24, the CPSE giant earned a consolidated net profit of Rs 1,470.09 crore compared to profits of Rs 904.12 crore in Q3FY23 and Rs 1,025.07 crore in Q2FY24. Consolidated revenue was up as well to Rs 5,409.90 crore in Q3FY24 as against Rs 3,719.99 crore in Q3FY23 and Rs 4,013.98 crore in Q2FY24.

The highest target price on NMDC is set by Motilal Oswal. In its research note, "We expect the volume challenges (due to pending EC clearances) to be more than offset by the improved outlook on ASP and lower mining costs. We have therefore increased our EBITDA estimates by 12.8%/14.2%/14.8% for FY24/FY25/FY26. NMDC trades at 5.7x FY26E EV/EBITDA and 2x FY26E P/B. We reiterate our BUY rating on NMDC with a revised TP of INR280."

Motilal's target price indicates to at least a 24.4% potential upside in NMDC shares ahead.

Meanwhile, analysts at Prabhudas Lillaher said, "NMDC is well placed to capitalize on strong volume growth in domestic steel markets over next two years given a) its increased focus on mining business expected to deliver strong 12% CAGR over FY23-26E to ~54mt iron ore volumes; b) doubling of railway line for evacuation and higher availability of rakes to support iron ore volume growth; c) other high margin minerals to constitute ~10-15% of revenue in next 5 years. "

Prabhudas note added, "We expect Revenue/EBITDA/PAT growth of 17%/20%/20% over FY23-26E. At CMP, stock is trading at 7.1x/5.6x EV of FY25E/FY26E EBITDA. Maintain 'Buy' rating with TP of Rs261 valuing at 6x EV of Mar'26E EBITDA."

Additionally, Antique Stock Broking has recommended buying for a target price of Rs 269.

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. 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.

NMDC is producing about over 40 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.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.