Why NMDC Share Price is Falling

NMDC, the largest iron ore producer in India and a Navratna public sector undertaking (PSU), has been a standout performer in the stock market over the past year.

The company's share price surged by 126.7%, making it a multibagger stock for investors. Even in 2024, the stock continued its upward trajectory, gaining 15.3% year-to-date (YTD).

However, despite this strong performance, NMDC's share price has recently taken a hit, slipping 9% over the last month.

This sudden decline has left many investors puzzled and concerned about the future prospects of the company.

Let's find out why this decline has occurred and what factors are contributing to the recent downturn in NMDC share price.

#1 Falling Price

State-owned NMDC has cut iron prices by Rs 500 per tonne for lump ore and fines, effective 30 June 2024. This is the first price reduction for the key raw material of steel this financial year, following two consecutive months of price hikes.

Before this, NMDC reduced its prices in March 2024, with a Rs 200 per tonne cut for lumps and Rs 250 per tonne cut for fines, according to an exchange filing.

It didn't have to reduce prices for eight months until March 2024. However, considering the market scenario, it has now made another reduction after just two consecutive months of rising prices.

These reductions reflect the company's response to changing market conditions and demand fluctuations.

Investors have reacted to this pricing strategy with concern, fearing potential impacts on revenue and profitability.

Consequently, these price reductions have led to a decrease in NMDC share price. The market sentiment has shifted in light of the new pricing strategy.

#2 Declining Sales

Recently the company presented its sales date for June 2024. The production and sales figures for June 2024 indicate a decline compared to the previous year.

In the period under review, NMDC's total iron ore production was 3.4 million tones (MT), down from 3.5 MT in June 2023, reflecting a decrease of approximately 3.2%. Sales also fell to 3.7 MT in June 2024, compared to 4.1 MT in June 2023, a drop of around 9%.

Cumulatively, up to June 2024, production stood at 9.2 MT, down from 10.7 MT up to June 2023, marking a decline of about 14.1%. Sales were down to 10.1 MT from 11.2 MT in the same period the previous year. This is a decrease of roughly 9.7%.

These reductions reflect the company's response to changing market conditions and demand fluctuations. Investors have reacted to this pricing strategy with concern, fearing potential impacts on revenue and profitability.

Consequently, price reductions, along with declining production and sales figures, have led to a decrease in NMDC share price, as market sentiment shifted.

What Next?

NMDC has reported significant achievements in the last financial year, setting new records in both production and sales.

The management attributes this success partly to the recent sanctions for the Kumaraswamy mines, which have added approximately 1.5 billion (bn) tones to its reserves. Looking ahead, the company anticipates even stronger performance for the current year.

Profits for Q4 FY24 showed a notable increase of around 19% compared to the previous quarter, excluding exceptional items. Throughout the year, excluding an exceptional item of approximately Rs 10 bn related to the monetary committee, its profit before tax (PBT) rose by about 30%.

Amid these achievements, its remains cautious due to the current global iron ore market dynamics. This is characterised by subdued steel consumption in major markets like China, which has led to declining demand and pressure on iron ore prices.

Despite these challenges, it is strategically positioned with the Kumaraswamy mines fully operational and additional reserves secured.

Looking forward, NMDC plans to invest significantly in capital expenditures (capex), with approximately Rs 500 bn in the pipeline at various stages of approval, including pending sanctions and tendering stages.

These investments aim to enhance operational efficiency, expand production capacity, and position NMDC as a 100 MT company within the next 5 to 6 years.

The company's robust investment strategy underscores its commitment to sustainable growth and resilience in navigating market uncertainties.

How NMDC Share Price has Performed Recently

In the past five days, NMDC share price tumbled 4%. In the last month, it is down 9%.

In 2024, so far its share price is up 15.3% and it surged 126.7% in the last year.

The stock touched its 52-week high of Rs 286.4 on 21 May 2024 and a 52-week low of Rs 105.7 on 3 July 2023.

NMDC is the largest iron ore manufacturer in India.

It's engaged in the business of exploration and production of iron ore, diamonds and sponge iron. The company also forayed into renewable energy and generates and sells wind power.

NMDC has seven iron ores mines in the country with a total production capacity of 36 million tonnes, accounting for 18% of the domestic production. It mostly supplies iron ore lumps and fines to steel manufacturing units and metallurgy industries.

The company has the lowest cost of producing iron ore in the country and enjoys cost leadership over its peers. This led the company to move up the value chain and establish its steel plant with a manufacturing capacity of 3 million tonnes.

For more details about the company, you can have a look at NMDC's factsheet and NMDC's quarterly results on our website.

You can also compare NMDC with its peers.

NMDC vs GMDC

NMDC vs MOIL

Happy Investing!

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