Shares of India's largest producer of iron ore, NMDC, were trading flat on Thursday (March 21) after global brokerage firm Citi maintained a 'Sell' rating on the stock and slashed its target price to ₹180 from ₹215 earlier.
Global iron ore prices have corrected from over $130 per tonne to $105 per tonne over the past two months, while NMDC's domestic iron ore prices have remained unchanged, said Citi's analysts in a client note.
The foreign brokerage feels that an iron ore price cut is imminent as current domestic prices are more than 25% (₹1,000 per tonne) premium to export parity. There is limited support from domestic steel price trends, it said.
In its note, Citi stated that every ₹100 per tonne change in fines prices impacts EBITDA by 4% and fair value by ₹8 per share.
NMDC had increased iron prices by ₹400 per tonne with effect from January 24, 2024. This was the second upward revision by the company, taking lump ore price to ₹6,000 a tonne and that of a similar quantity of fine ore to ₹5,310.
The state-owned iron ore miner, NMDC Ltd had in the previous revision on January 2, 2024, raised the per tonne lump ore price by ₹200 per tonne to ₹5,600 and by ₹250 to ₹4,910 for the same quantity of fines.
In a new development on Thursday, NMDC has cut lumps and fines prices by ₹200 per tonne and ₹250 per tonne respectively, it said in an exchange filing.
While the prices of lumps are cut to ₹5,800 per tonne, the price of fines is cut to ₹,5060 per tonne. This is the first price cut undertaken by NMDC since August 2023.
Iron ore is a key raw material for steel and movement in the prices is a reflection of the demand for the final product.
NMDC trades at 7.5 times 1-year forward, EV/EBITDA on consensus — in line with global peers.
The scrip settled 2.25% higher at ₹204.80 on Wednesday. The stock has also gained over 40% in the last six months.
Global iron ore prices have corrected from over $130 per tonne to $105 per tonne over the past two months, while NMDC's domestic iron ore prices have remained unchanged, said Citi's analysts in a client note.
The foreign brokerage feels that an iron ore price cut is imminent as current domestic prices are more than 25% (₹1,000 per tonne) premium to export parity. There is limited support from domestic steel price trends, it said.
In its note, Citi stated that every ₹100 per tonne change in fines prices impacts EBITDA by 4% and fair value by ₹8 per share.
NMDC had increased iron prices by ₹400 per tonne with effect from January 24, 2024. This was the second upward revision by the company, taking lump ore price to ₹6,000 a tonne and that of a similar quantity of fine ore to ₹5,310.
The state-owned iron ore miner, NMDC Ltd had in the previous revision on January 2, 2024, raised the per tonne lump ore price by ₹200 per tonne to ₹5,600 and by ₹250 to ₹4,910 for the same quantity of fines.
In a new development on Thursday, NMDC has cut lumps and fines prices by ₹200 per tonne and ₹250 per tonne respectively, it said in an exchange filing.
While the prices of lumps are cut to ₹5,800 per tonne, the price of fines is cut to ₹,5060 per tonne. This is the first price cut undertaken by NMDC since August 2023.
Iron ore is a key raw material for steel and movement in the prices is a reflection of the demand for the final product.
NMDC trades at 7.5 times 1-year forward, EV/EBITDA on consensus — in line with global peers.
The scrip settled 2.25% higher at ₹204.80 on Wednesday. The stock has also gained over 40% in the last six months.
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First Published: Mar 21, 2024 9:55 AM IST
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