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Prabhudas Lilladher Report
NMDC Ltd. underperformed steel stocks by a wide margin over last three months due to uncertainty regarding payment of premium for its Donimalai mine’s lease renewal.
After two years impasse, Government of Karnataka renewed Donimalai mines (with capacity of seven million tonne per annum) at a premium of 22.5% of sales price.
We expect that similar premium would be paid for its iron ore operations in Chhattisgarh, which constitutes 78% of its overall volumes.
Severe shortage in domestic market (due to supply disruptions in Odisha), strong profitability of steel producers and firm outlook on global prices shall help the company to mitigate higher costs with stronger product prices.
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