Motilal Oswal 's research report on NMDC
NMDC has cumulatively raised iron ore prices by INR400/t over Jul–Aug on improving volumes (up 7% YoY in Jul’20), ahead of our expectations. Rising capacity utilization by steel players and higher steel prices bode well for NMDC and should support higher volumes and prices; we raise our EPS estimate by 12%/5% for FY21/FY22. We also find the valuation attractive as CMP of INR85/sh implies nil value for the 3mtpa Nagarnar steel plant (INR55/sh book value) and a 6.5% dividend yield. Reiterate Buy.
Outlook
Also, the stock provides dividend yield of ~6.5% at current prices. We value the stock at INR120/share on an SOTP basis – 5x FY22E EV/EBITDA for its core iron ore mining business and 50% of the book value for the Nagarnar plant. Reiterate Buy.
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