Shares of this Public Sector Undertaking (PSU) company jumped approximately 6 percent in Monday’s trading session after a well-known Domestic Brokerage gave a ‘Buy’ call on the company’s stock with a potential upside of more than 20 percent. In the past six months, the company’s stock has gained more than 40 percent for its stakeholders.
With a market capitalization of Rs 62,363.29 crores, the stocks of NMDC Limited opened their trading hour on Monday at Rs 205 and currently trades at Rs 212.80, gaining approximately 6 percent compared to the previous closing levels of Rs 201.70 apiece.
Such bullish share price movements were observed after Motilal Oswal Financial Services, one of the well-known Domestic Brokerages in India, gave a ‘Buy’ call on the stocks of NMDC Limited.
The Brokerage gave a target price on the company’s stock which stood at Rs 260 and the same represents a potential upside of around 22 percent as compared to the prevailing share price level.
The Brokerage expects that the iron ore company is well on track to exceed 50 million metric tonnes in FY25 and 55 million metric tonnes in FY26. Moreover, the company’s planned capex for several evacuation and capacity enhancement projects is expected to improve the product mix and augment its production capacity to 100 million metric tonnes by FY29-30.
On a contrasting note, the Brokerage also listed some of the key risks that could be faced by the company, including the auction of around 105 iron ore blocks, relying heavily on a few customers exposing the company to business risks, and many more.
During the recent financial quarters, the company’s prime business indicators, viz, its operating revenues as well as bottom-line numbers, witnessed positive movements.
The former increased from Rs 4,014 crores during Q2FY24 to Rs 5,410 crores during Q3FY24, and the latter, keeping the timeframe the same, rose from Rs 1,026 crores to Rs 1,482 crores.
On a contrasting note, the company’s annual underperformance portrayed a dip in its margins as well as return ratios. The net profit margins (NPM) saw a reduction from 36.28 percent during FY21-22 to 31.34 percent during FY22-23.
Moreover, the return on equity (RoE) and return on capital employed (RoCE) declined with the former from 26.80 percent to 24.76 percent and the latter from 34.32 percent to 26.96 percent.
Founded in 1958, NMDC Limited is engaged in the business of mining a wide range of minerals, including copper, sponge iron, iron ore, rock phosphate, limestone, and many more.
With the Government of India owning a majority stake, the company generates a majority of its revenue from the domestic markets.
Written by Amit Madnani
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