Checkout Budget Highlights 2023Motilal Oswal's research report on NMDC
NMDC has attractive fundamental setups with robust steel demand, no export duty, and no overhang from the steel business. Domestic steel demand is looking up with the government’s focus on Infra development and with the opening up of the China market. Many steel players are adding capacity and this, we believe, would drive up demand for Iron ore over the next few years. Removal of export duty on iron ore, pellet, and steel in Nov ‘22 is already showing positive signs and prices of iron ore have increased since then. Also, global iron ore prices have been rising, on the back of improving China demand. This, we believe, would benefit players such as NMDC to supply more in the domestic market as well as look to exports. NMDC has demerged its steel plant, which has now been listed separately. The overhang of the steel plant capex has been done away with, providing more comfort on the core iron ore business. Capacity expansion is on the cards for NMDC (50MT being increased to 70MT), which would support volumes ahead. Strong domestic demand, exports of iron ore and pellets would be the key demand drivers for NMDC.
Outlook
NMDC trades at EV/EBITDA of 3.5x FY24E. We reiterate our Buy rating on the stock with a target price of INR155 (5x EV/EBITDA). We believe NMDC is very well placed to capitalize on the growth opportunity ahead.
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