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Buy NMDC; target of Rs 140: ICICI Direct

September 14
17:25 2018

ICICI Direct’s research report on NMDC

In September 2018, NMDC took a price hike of Rs 200/tonne for iron ore lumps and Rs 150/tonne for iron ore fines (the price hike will be with effect from September 7, 2018). The revised prices for iron ore lumps are at Rs 3550/tonne (from Rs 3350/tonne previously) while prices of fines have been revised to Rs 3110/tonne (from Rs 2960/tonne previously). The increase in iron ore prices is in the backdrop of a healthy demand scenario and increased pellet prices. Cumulatively, since July 2018, iron ore lumps prices have increased by ~Rs 500/tonne while fines prices have increased by ~Rs 450/tonne. On the back of strength seen in domestic iron ore prices, we upward revise our iron ore realisation estimates for both FY19E and FY20E while maintaining our volume estimates.

Outlook

The sharp increase in pellet prices recently also augurs well for the company. We value the company on an SOTP basis and arrive at a target price of Rs 140. We upgrade our recommendation to BUY.

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