With rising international iron ore prices, prospects for domestic players have also improved. Even after the 9 per cent hikes in the current quarter, analysts at Kotak Institutional Equities say that if import parity is considered, there is potential of further 10-15 per cent price hike. Clearly, the realisations outlook has improved.
Higher volumes from Chhattisgarh mines also bode well. The demand of iron ore in the country remains strong due to higher steel demand. Brokerages which expect iron ore mining to resume in Karnataka are positive for NMDC.
Analysts at Motilal Oswal Securities say the operations at Donimalai mine remain suspended, but expect NMDC to eventually get its mining leases renewed without sharing any revenue. There is no risk to the renewal of Chhattisgarh mining lease, according to the company. Hence, analysts see significant gains for the stock.
Analysts at Antique Stock Broking, too, have revised price targets as commissioning of the steel plant, targeted in second half of 2019-20, would improve return ratios and lead to a higher valuation of the asset.
However, investors need to be watchful in the interim. The mining leases of Odisha miners expire in March 2020 and there could be volume surge prior to this in the domestic market. This might have a negative impact on domestic prices, despite strong international prices.
Though expectations are high on Donimalai mining resumption, till the same happens, the company may not see volume growth. Volume challenges and Odisha-related risks can lead to volatility in stock prices in the near term.