This PSU’s earnings may peak in FY25 and decline thereafter, Kotak Institutional Equities warns

Brokerage firm Kotak Institutional Equities believes that the earnings of state-run miner NMDC Ltd. is likely to peak in the current financial year and decline thereafter.As a result, the brokerage has a “sell” recommendation on NMDC with a price target of ₹55, which implies a further 15% downside from current levels. The stock is already down 31% from its recent peak of ₹95.

Kotak’s price target on NMDC

is also the lowest on the street for the stock.
The brokerage said that declining iron ore prices on increasing market surplus for seaborne iron ore and increasing supply pressure in India with a ramp-up of merchant iron ore mines directly competing with NMDC’s Chhattisgarh mines are some key headwinds for the stock, both locally and globally.NMDC’s future expansion plans are significantly return dilutive and the Karnataka tax bill, if implemented, could sharply impact earnings and is not built into our base case, Kotak wrote in its note.

Karnataka is an important state for NMDC as it contributes to nearly 35% of the overall mix for the company.

Out of the 23 analysts that have coverage on NMDC, 13 of them have a “buy” rating, four have a “hold” rating, while six have a “sell” rating on the stock. Consensus estimates are projecting a potential upside of 14% for the state-run company.

Shares of NMDC are currently trading 1.9% lower at ₹64.68.