Can NMDC shares revisit 52-week high? Buy Navratna PSU stock, says Nuvama

Shares of Navratna NMDC Ltd, which are down 23 per cent from May high level, look inexpensive at 7.6 times estimated FY26 earnings per share and 4.5 times estimated FY26 EV/Ebitda, said Nuvama Institutional Equities in a note. On Friday, the stock rose 2.09 per cent to hit a high of Rs 220 on BSE. The brokerage has set a 12-month target price of Rs 286 on NMDC, which is also the stock's 52-week high level (Rs 286.35 hit on May 21). 

The PSU stock has been under pressure amid falling iron ore prices along with lower volumes that were observed from April to August due to labour strikes, heavy monsoons and a few logistics constraints. Nuvama said global iron ore prices have bottomed out at $90 per tonne and anticipated them to to recover to an average $105–110 per tonne in FY25E and FY26.

"The probability of any major decline in NMDC’s prices is very low as demand is set to improve. Besides a recovery in global iron ore prices, we forecast NMDC’s iron ore volume shall recover in H2FY25 with a seasonally good second half along with absence of workers’ strike, which hurt volumes in Q1FY25," it said while suggesting a 'Buy' call on the stock, valuing the stock at 10 times FY26 EPS.

Nuvama said NMDC has maintained and not revised its prices for September deliveries, even as the market has been awaiting a correction. In total, NMDC cut prices by Rs 1,000 per tonne during July and August. 

"Our calculation indicates that NMDC’s prices are trading at 21 per cent discount to landed cost of imports (same as it was in June). As demand for iron ore is still firm in India, NMDC is in no rush to cut prices. With an improvement in seasonality demand from October, NMDC may not cut prices or even if it cuts, it could be in the range of Rs 200–300 per tonne only," Nuvama said.
    

NMDC’s iron ore sales volumes were down 7.5 per cent YoY to 16.3 mt between April and August, which was due to a labour strike as well as logistics constraints at Karnataka as well as Chhattisgarh mines. 

Nuvama expects ease of logistics constraints in H2FY25 and thus volume growth of 13 per cent in the rest of the months to reach 47mt (up 6 per cent YoY). It is factoring in 8 per cent volume CAGR over FY24–26 to 51.3mt at Ebitda per tonne of Rs 1,927. At the prevailing price of iron ore, NMDC must be making Rs 1,800–1,900 per tonne Ebitda, the brokerage said.