NMDC zooms 6% on report Credit Suisse initiates coverage, sees 45% upside

NMDC shares zoomed 6 per cent to quote at Rs 119 apiece on the BSE on Tuesday amid report that foreign brokerage Credit Suisse has initiated coverage on the stock with an 'Outperform' rating. It also has a target price of Rs 162 on the stock, implying around 45 per cent upside from Monday's closing price of Rs 112 on the BSE.

At 9:45 am, the stock was quoting at Rs 116 per share, up 4 per cent on the BSE, as against a 0.5 per cent rise in the S&P BSE Sensex. A combined 7.18 million shares had changed hands on the counter on the NSE and BSE. 

Meanwhile, Asia's iron ore and steel stocks rose as BHP Group, the world's top miner, boosted its outlook for the global economy and announced a record first-half dividend, fueling expectations for a new commodities supercycle, news agency Bloomberg reported. The company's H1 underlying profit missed estimates while underlying Ebitda beat forecasts. 

"BHP's net profit fell by one fifth from $4.9 billion a year ago to nearly $3.9 billion ($5.01 billion) for the six months to end of December after one-off write-downs of $2.2 billion, mainly from its coal mines in New South Wales, its part-owned Cerrejon open cut coal mine in Columbia and tax losses," the company said in a statement. 

It added: However, record production of iron ore in Western Australia and copper extraction from its Escondida mine in Chile, combined with higher prices for both commodities, saw net profit before write-downs rise 16 per cent to $6.04 billion ($7.76 billion) for the six months to the end of December from $5.19 billion for the same time in 2019.

For the quarter ended December 2020, NMDC reported a 53 per cent jump in net profit at Rs 2,109 crore as against a profit of Rs 1,376 crore during the same period last year. Its turnover during the quarter was at Rs 4,355 crore as against the turnover of Rs 3,006 crore of the same period last year, up 45 per cent jump.

"The turnover in this quarter is the best ever for any quarter for NMDC since inception. The company's earnings before interest, taxes, depreciation and amortization (Ebitda) grew 67 per cent to Rs 2,873 crore for the December quarter," it said in a statement.

"NMDC is a play on strong iron ore prices and volumes, which is well reflected in its 3QFY21 result. Ebitda at Rs 2,770 crore and Ebitda/t at Rs 2,982 were the highest ever... Margin should rise further in 4QFY21 as the spot price (even after the correction in Feb’21) is still around 17 per cent higher than its 3QFY21 average. Moreover, volume should get a boost in FY22 from the restart of Donimalai mines," analysts at Motilal Oswal Financial Services said in a result update note. The brokerage has 'Buy' rating on the stock with a target price of Rs 140.

Those at ICICI Direct, meanwhile, have 'Hold' rating on the stock on the back of an additional charge of 22.5 per cent with respect to allocation premium for all mines from FY22 onwards.

"This is except for the Kumaraswamy mines where we have factored the allocation premium from October 2022 when the environmental clearance of the mine is renewed. We introduce FY23E estimates and roll over our valuations to FY23. We value the stock on an SoTP basis and arrive at a target price of Rs 125," it said.