NMDC shares up over 60% in six months; is more steam left?

Shares of NMDC Ltd were trading higher in Monday's trade, pausing their three-day losing run. The stock rose 2.46 per cent to hit a day high of Rs 173 over its previous close of Rs 168.85. The scrip has gained more than 62 per cent in the last six months. Brokerage Nuvama Institutional Equities has maintained its 'Buy' call on the counter, suggesting a target price of Rs 195 in a year.

"At Q2 FY24-end, net cash rose to Rs 11,730 crore (Rs 40/share) versus Rs 6,630 crore (Rs 23/share) at FY23-end on lower receivables post NMDC receiving Rs 957 crore from Monitoring Committee and higher bill discounting. We expect net cash at Rs 10,900 crore (Rs 37/share) in FY24E and at Rs 14,200 crore (Rs 49/share) in FY25E after providing for DPS of Rs 15 in FY24E, Rs 7 in FY25E. With carving out of steel plant, NMDC's full focus shall be on mining that shall be a relatively high RoE business," the brokerage stated.

"NMDC is about to raise iron ore capacity by 2MTPA in Chhattisgarh and 2.3MTPA in Karnataka within November 2023. With this, total Environmental Clearance (EC) limit will rise to 54MTPA and provide visibility to volume growth until FY26," it added.

Analysts at Prabhudas Lilladher (PL) said NMDC is well placed to capitalize on strong volume growth in domestic steel markets over next two years.

"We expect Revenue/EBITDA/PAT growth of 12 per cent/15 per cent/14 per cent over FY23-26E. The stock is trading at 5.5x/4.2x EV of FY25E/FY26E EBITDA. Retain 'Accumulate' rating with revised target price of Rs 176 (earlier Rs 147) valuing at 5x EV of Sept 2025E EBITDA, as we roll forward," PL mentioned.

On the technical front, the counter was trading higher than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-, 200-day simple moving averages (SMAs). The counter's 14-day relative strength index (RSI) came at 65.48. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 8.47 against a price-to-book (P/B) value of 2.05.

The scrip has an analyst target price of Rs 152, Trendlyne data showed, suggesting a potential downside of 11 per cent in a year. It has a one-year beta of 0.2, indicating low volatility on the counter.

"After a stellar rally, it looks like NMDC is getting exhausted at higher levels. As we advance, Rs 160 would be solid support, and resistance could seen near Rs 180 level," said Jigar S Patel, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers.

"NMDC is sideways to bearish on daily charts with strong resistance at Rs 175. A daily close below support of Rs 166 could lead to target of Rs 152 in the near term," said AR Ramachandran from Tips2trades.

(Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)

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