While higher international prices will support domestic prices, the demand also gets a boost in absence of imports by steel manufacturers having proximity to ports. NMDC, too, is seeing strong demand momentum helping it maintain volumes despite the disruption at its Donimalai mines in Karnataka. NMDC’s volume off-take was up 34 per cent year-on-year during April-May 2019.
While June numbers are not available yet, analysts at ICICI Securities estimate a 32 per cent growth in volumes during the June quarter. Attractive prices are aiding off-take and NMDC
remains on track to achieve its FY20 volume guidance of 32 million tonnes per annum (mtpa), say analysts at Kotak Institutional Equities. In FY19, the company had clocked volumes of about 32.4 mtpa.
With stable volumes and improving realisations, it is not surprising that the Street sentiment has remained firm. Analysts, too, are upgrading their ratings for the stock. Analysts at Edelweiss say that unlike its peers, NMDC’s FY20 EBITDA is likely to sustain at the FY19 level owing to stable volumes and pricing. EBITDA is earnings before interest, tax, depreciation and amortisation. The analysts have raised their iron ore price estimates by 5 per cent each for FY20 and FY21 and upped their ratings from Hold to Buy.
Moreover, the restart of Donimalai mines can lead to a 10 per cent increase in fair value of the stock. Also, while the steel plant commissioning had continued getting delayed, it is now seen started by FY21.
On the whole, most analysts are positive on NMDC.
According to Bloomberg, over 75 per cent have a buy rating on the stock, and their average one-year target price indicates a potential upside of over 14 per cent.