NMDC shares zoom 100% in six months — what's behind the rally?
State-owned NMDC has increased prices of lump ore and fines amid a rising demand for key steel-producing raw material. Additionally, the iron ore producer reported that the production for 2023 had risen around 18% from 2022 levels.
Shares of National Mineral Development Corporation Ltd (NMDC) were trading nearly 4% higher on Tuesday, continuing its nine-day gaining streak. At 12:18 pm, the stock rose 3.78% to hit a day's high of ₹219.40 over its previous close of ₹211.8. The scrip, which has risen over 100% in the last six months, hit its highest level since 2011.
The state-owned company has increased prices of lump ore and fines amid rising demand for key steel-producing raw material. Additionally, the iron ore producer reported that the production for 2023 had risen around 18% from 2022 levels.
With effect from January 2, the price of lump iron ore has been raised by ₹200-250 per tonne to ₹5,600 per tonne, while the price of fines has been increased by ₹250 per tonne to ₹4,910 per tonne.
NMDC has increased prices of lump ore by ₹950 per tonne and fines by up to ₹1,000 per tonne since August 2023.
The rise in international iron-ore prices is boosting investor confidence towards India's largest iron-ore producer. Notably, the iron-ore demand in the country also remains strong led by strong steel demand.
In November, Chairman and Managing Director (additional charge) Amitava Mukherjee has flagged "tremendous" demand for both lumps and fines in a post-earnings call with analysts.
What Works for NMDC?
1. Iron ore prices can remain strong.
India is adding 24-25 million tonnes of steelmaking capacity in the next 18 months.
2. Strong operational capacity
December 2022 versus December 2023 (YoY)
Production +24.1% at 4.48 MT vs 3.61 MT
Sales +26.2% at 4.19 MT vs 3.32 MT
3. Cash is 18% of Mcap
4. Capacity expansion plans
67 MTPA by FY25
100 MT by FY30
The 65-year-old company, under the administrative control of the steel ministry, has been involved in the exploration of a wide range of minerals, including copper, rock phosphate, limestone, magnesite, diamond, tungsten and beach sands. Its customers include Jindal Steel, JSW Steel, Arcelor Mittal and Nippon Steel.
(Edited by : Meghna Sen)
First Published: Jan 2, 2024 1:03 PM IST
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