The Domestic brokerage firm Motilal Oswal Financial Services has revised its target price on NMDC.
Earlier their target price for the stock was Rs 134 but now they have revised the target price to Rs 138.
The reasons for upgrading the target price :
The brokerage firm believes that the demand for iron ore will surge globally because of the forecasts for the reopening of China.
Also, the measures taken to boost the GDP growth in China should lead to higher steel production and consequently, demand for iron ore and pellets should also increase.
Recently in October 2022, NMDC formally de-merged its steel plant. This steel plant will now be listed separately.
Motilal Oswal Financial Services believes the government is likely to disinvest its shareholding in the NMDC steel plant.
So any additional CAPEX now on the steel plant will be through the balance sheet of the steel plant without affecting to the mining business.
Also, Motilal Oswal Financial Services is expecting a strong dividend from NMDC because presently NMDC does not have a very large CAPEX pipeline for the mining business.
Motilal Oswal Financial Services also expects NMDC to continue with a Volume CAGR of 11.5% from FY21-25.
Because of higher volumes in both Chhattisgarh and Karnataka, it sees a record 51 MT volume in FY25.
In Q2FY23, the company posted a 62% fall in its consolidated net profit to Rs 885.65 crore, mainly because of a fall in domestic iron ore prices.
But with the reopening of China, iron ore demand is set to bounce back and prices will shoot up, as per MOFS. Capex-intensive plans will also reduce after demerger; thus, the brokerage has increased its FY23/24 EBITDA estimate by 3 percent/4 percent. It has a Buy rating on the stock with a target price of Rs 138 apiece.
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