NMDC trades in red even as Q2 net profit jumps 15%; brokerages remain upbeat

Shares of National Mineral Development Corporation Ltd (NMDC) dropped 2 percent intraday on November 15 on profit-taking even as the mining giant registered a 15 percent jump in Q2 net profit. At 11:40am the stock was trading at Rs 170.24 on the NSE.

The country’s largest iron ore producer reported a 15.7 percent increase in consolidated net profit for the second quarter on the back of healthy demand. NMDC’s net profit climbed to Rs 1,024.86 crore in the three months ended September from Rs 885.65 crore a year earlier, the state-run company said in a statement on November 14. Its revenue from operations zoomed 20 percent to Rs 4,013.98 crore in the September quarter from Rs 3,328.5 crore last year.

Brokerage views, target prices

Brokerage firm ICICI Securities assigned a ‘buy’ rating to the NMDC stock with a target price of Rs 180 in a recently released research report. “With significant capital allocation towards steel plant since FY12, we saw NMDC’s Return on Equity (RoE) gradually reducing from a healthy 33.6 percent in FY12 to 21.7 percent by FY21. Despite the change in mining law that necessitates higher royalty pay out, we expect RoE to improve hereon as high margin and low capex intensive mining business ramps up,” it said.

NMDC stock performance

The NMDC stock has given a return of 64.22 percent over the last six months. The benchmark Nifty50 index has given a return of 5.68 percent over the same duration.

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NMDC operates four iron ore mines in the Chhattisgarh and Karnataka. The results came as domestic steelmakers, which use iron ore as a key raw material, remain optimistic about demand as the government accelerates infrastructure spending ahead of the general elections in 2024.

Also Read: NMDC Q2 net profit jumps 15% to Rs 1,024.86 crore

“Robust iron ore sales volume and the recent recovery in iron ore prices reinforce our confidence with respect to strong earnings performance by NMDC,” brokerage Sharekhan said in an earlier note dated September 29.

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