Motilal Oswal Bullish On PSU Metal Sector Stock, Buy For 45% Strong Upside, Recommends Dividend

Motilal Oswal has placed a Buy on NMDC Ltd. with a target price of Rs. 150/share. The stock sees a strong upside of 45% from its current level considering the given target price and the current market price of the stock.

The Board of NMDC in their meeting held on 23 May 2023, recommended a final dividend of Rs. 2.85/share for the financial year 2022-23.

This is Navratna category Metal Sector PSU stock. It is a midcap stock with a market capitalisation of Rs. 30,536.91 crores.

Recommends Final Dividend of Rs. 2.85/share

According to a regulatory filing by the Board of Directors of NMDC Ltd., "the Board of Directors of the Company, in the said meeting, has also recommended the payment of Final Dividend of Rs. 2.85 (Rupee Two and Eighty Five paise only) per share on the face value of Rs. 1 /- each for the financial year 2022-23, subject to approval of the shareholders in the ensuing Annual General Meeting (AGM). This is in addition to the Interim Dividend of Rs. 3.75 per equity share already declared and paid during the financial year. The Final Dividend for the financial year 2022-23 of Rs. 2.85 per share, if declared at the ensuing AGM, will be paid to the shareholders within 30 days from the date of AGM."

Valuation and view

According to Motilal Oswal, India is one of the handful countries, which is expected to witness a surge in steel production and consumption over the next decade. India is all set to double its capacity with all major steel manufacturers undertaking robust capacity expansion to cater to the ever-rising domestic demand, which will further drive the demand for iron ore in India. NMDC, which has clocked the production of over 40mt for two consecutive years, has started FY24E with the highest ever first month (Apr) production and sales of 3.5mt and 3.4mt (up 11.4% and 10.1% YoY). NMDC is expected to achieve 50mt production target in FY24."

NMDC is undertaking numerous capex programs, which will drive up its mining capacity to 70-75mt from its current 50mt. However, iron ore prices across the globe are currently witnessing price correction due to subdued global steel demand. Though NMDC witnessed an improvement in NSR in 4QFY23. In line with the global price movement, the company has taken a price reduction in Apr'23. "Though we expect the company to continue on its volume growth journey, any price reduction would offset the incremental volume benefits. NMDC trades at an FY24E EV/EBITDA of 3.1x and FY24E P/B of 1.4x. We have a BUY rating on NMDC with a TP of INR150. We would review our estimates post the earnings call," the brokerage has said.

Stock Outlook

The stock of NMDC is currently trading at Rs. 104/share, down 1.05% from the previous close of Rs. 105.10/share. Its 52 week low is Rs. 92.25/share and 52 week high is Rs. 137.45/share, respectively.

It declined 0.76% in 1 week, 4.41% in 1 month and 7.14% in 3 months, respectively. It declined 14.09% in 1 year. However, it gave a positive return of 43.55% in 3 years. In 5 years, it gave 10.81% negative return.

Disclaimer - The stock has been picked from the brokerage report of Motilal Oswal. 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.