Buy This Metal PSU Stock For Potential Upside, Target Price Rs 175/Share: Sharekhan

Sharekhan, a leading brokerage firm, has placed a Buy rating on NMDC Ltd with a revised PT of Rs. 175 apiece. The shares of NMDC on Friday rallied over 4% with the day's high of Rs 149 on the BSE.

Considering the assigned target price, the stock is likely to give a robust return of up to 19% if purchased at the current market price. NMDC is Navratna Status PSU Stock.

NMDC has taken a price hike of Rs. 300/per tonne (or 6.5%/7.7%) for iron ore lump/fines in September 2023, which reflects a recovery in international iron ore price, brokerage stated in the report.

Furthermore, Operational performance is robust with 23%/32% y-o-y growth in iron ore production/sales volume in 5MFY24 and gives confidence on achievement of volume guidance of 47-49mt/>50mt for FY24E/ FY25E.

"We model a strong 12% iron ore sales volume CAGR over FY23-26E. Long-term outlook is also encouraging with aspiration of 100mt in next five years," the brokerage said.

Valuation - Maintain Buy on NMDC with a revised PT of Rs. 175 apiece

The brokerage said, "We have introduced our FY26 earnings estimates in this report. Strong domestic steel demand bodes well for volume growth of NMDC, which would be the key earnings growth driver over FY24-26. Moreover, the recent demerger of the steel business will reduce the capital intensity and improve the dividend payout ratio. Moreover, valuation of 4.1x its FY2026E EV/EBITDA and 1.3x its FY26E P/BV is attractive, and the stock offers a healthy dividend yield of 6%."

It added, "NMDC has high cash of Rs11200 crore (as of June 2023), which is 26% of its current market capitalisation, and the same provide comfort to investors. Hence, we maintain our Buy rating on NMDC with a revised price target (PT) of Rs. 175 (rollover of valuation multiple to September 2025 earnings estimate)."

NMDC's Stock Performance

NMDC's stock price on Friday jumped 4.19% to close at Rs 147.85 apiece on the BSE. It gained 3.36% in 1 week. It gained 20.30% in 1 month. It gained 44.78% in 1 year, and 118.84% in 3 years, respectively. Its 52-week high is Rs 154.15 apiece and its 52-week low is Rs 93.60 apiece on the BSE. It has a market cap of Rs 43,329.01 Crore.

About - NMDC Ltd.

NMDC, a government-owned company, is India's largest iron ore producer. NMDC is operating four iron ore mechanised mines viz., Bailadila Iron Ore Mines - Kirandul Complex (Dep-14, 14 NMZ, 11B and 11C), Bailadila Iron Ore Mine - Bacheli Complex (Dep-5,10 and 11A) in Chhattisgarh, Donimalai Iron Ore Mine and Kumaraswamy Iron Ore Mine in Karnataka. The company also produces and sells diamonds, sponge iron, and wind power.

Disclaimer - The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.