NMDC gains 5% on higher iron ore prices; stock surges 24% in a month

Shares of NMDC climbed 5 per cent to Rs 113.50 on the BSE on Friday on reports that the benchmark iron ore prices have crossed the $150/tonne mark. Iron ore prices are at their highest level since 2013 and are currently at $157/tonne.

According to a Bloomberg report, futures in Singapore have surged almost 70 per cent this year, hitting their highest since trading started in 2013, as China’s stimulus-led rebound fuels steel output and consumption. The rally received an added boost from Vale SA’s cut to annual production guidance last week, while the first quarter is likely to bring elevated risks of weather disruptions for southern hemisphere producers. CLICK HERE TO READ FULL REPORT

In the past month, the stock has outperformed the market by gaining 24 per cent, as compared to 6 per cent rise in the S&P BSE Sensex.

NMDC is the largest merchant miner in India. The rally in global iron ore prices augurs well for NMDC as it provides the domestic iron ore major likely room to increase its prices further, thereby auguring well for the company, ICICI Securities said in a note.

“NMDC’s volume outlook has strengthened further with the resumption of Donimalai mine expected by December-end. Strong volume trend (sales of 3.3mt in Nov’20, up 18 per cent YoY), coupled with strong iron ore pricing (hike of Rs 500/t in Dec-20), should drive near-term earnings. Resumption of the Donimalai mine should drive 11 per cent EBITDA (earnings before interest, taxes, depreciation, and amortization) growth in FY22E on the back of a 18 per cent volume growth,” Motilal Oswal Securities said in stock update.