Valuation Attractive, Fundamentals Supportive: Motilal Oswal Bullish On Mining Stock, Buy

Motilal Oswal has recommended investors to buy large cap mining sector stock, NMDC Ltd with a target price of Rs 138. The Chinese government appears to be focusing on reopening the economy now after three long years of following a strict zero covid strategy (ZCS), which has led to significant reduction in GDP growth rate.

The current market price of the stock is Rs 122 apiece. If you buy NMDC Ltd now, you will get 13% upside. Check key details below:

1. NMDC Ltd Stock Performance & Return

The current market price of the stock is Rs 122 apiece with intraday gain of over 2%. The stock's 52-week high is Rs 143 apiece and 52-week low is Rs 81 apiece, respectively. The company has a market capitalisation of Rs 35,973 crore. The shares of the company have surged 10% in just 1-week, 4% in 1-month, and 2% today. The stock has declined 6% in last 1-year.

2. Iron Ore Prices Set To Rise Further

NMDC has rolled back the INR 300 price reduction taken in mid-Nov'22, primarily due to withdrawal of export duty on iron ore, pellet, and steel by the government. Although NMDC does not export anything, the withdrawal has opened up opportunities for the company. With recent increase in exports in both iron ore and pellet and robust OMC auctions, we expect NMDC to announce further hike in iron ore prices.

3. No More Steel Plant Capex Hangover; Expect Strong Dividend

NMDC has formally de-merged its balance sheet and the process of listing of the steel plant is on. We believe the government is likely to dis-invest its shareholding in the NMDC steel plant.

Any additional capex now on the steel plant will be through the balance sheet of the steel plant without recourse to the mining business. NMDC does not have a very large capex pipeline for the mining business, hence, we expect a strong dividend.

4. Valuation

According to Motilal Oswal, "With China re-opening and rushing to finish real estate projects, we expect demand for iron ore to remain strong in the near term. In addition, we expect with winter in China, focus shall again be on importing more pellets from India which should drive demand for iron ore in India. The government waiving off pellet export duty is an added advantage. We reiterate our BUY rating with a revised TP of INR 138 (v/s 134 earlier)"

5. About NMDC Ltd

Incorporated in 1958 as a Government of India public enterprise, NMDC is India's largest producer of iron ore. Since inception, the corporation under the administrative control of the Ministry of Steel, has been involved in the exploration of a wide range of minerals including copper, rock phosphate, limestone, magnesite, diamond, tungsten and beach sands amongst others in some of the most remote corners of the country.

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 check with certified experts before taking any investment decision.