Sell NMDC; target of Rs 72: Emkay Global Financial
Emkay Global Financial is bullish on NMDC has recommended sell rating on the stock with a target price of Rs 72 in its research report dated July 02, 2020.
July 03, 2020 / 04:11 PM IST
Emkay Global Financial's report on NMDC
Production for Q1FY21 stood at 6.61mt, down 22% yoy/up 10% qoq. On a yoy basis, production fell due to subdued production in April and May. June production seems to have recovered but with the onset of monsoon, it is likely to fall in Q2. Q1FY20 sales declined sharply by 27% yoy and 25% qoq due to poor demand from steel producers and Covid-19-related slowdown. Sales fell significantly in Chhattisgarh by 35% sequentially. NMDC has raised prices by Rs200-250/t recently due to increased steel production after the lockdown ended. However, with the onset of monsoon and rising Covid-18 cases, we expect steel production to slow down in Q2, leading to reduction in prices.
We maintain Sell with a TP of Rs72, based on 4x Mar-22 EV/EBITDA estimates with UW in Sectoral EAP. Rising Covid-19 cases in India and the second wave in various parts of the world may keep demand for steel and consequently ore subdued.
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