Comments
Target: ₹240
CMP: ₹226.80
Q2-FY25 standalone revenues of ₹4,807 crore (up 19.7 per cent y-o-y; down 10.6 per cent q-o-q) was inline with our estimates as the realisation was up 17.7 per cent y-o-y and down 7.6 per cent q-o-q. Iron ore volumes of 9.7 million tonnes rose only 1.8 per cent y-o-y and decreased 3 per cent q-o-q.
Production volumes in H1 have been 17.6 mt and the full year guidance is of 50 mt. Realisations should improve in Q3 as the company has taken price hikes in October. Operating profit of ₹1,440 crore (up 20.7 per cemt y-o-y and down 39 per cent q-o-q) was a miss on our estimates.
Key positives: It has taken cumulative price hikes of 17-18 per cent in October; key negative: Volume growth was only 1.8 per cent y-o-y.
Strong domestic steel demand bodes well for a rise in NMDC’s volumes over the years. However, a tepid outlook for the steel sector is putting a pressure on iron ore prices and it will have a negative impact on realisations and earnings. The current pricing is not in line with the weak global outlook and is unlikely to sustain. Hence, we maintain our Hold rating on the stock with a revised PT of ₹240.
Key Risks: Rise in iron ore price and demand is an upside risk and vice versa.
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