PSU stock hits 52 week high as iron ore prices surge on China demand hopes

Synopsis: NMDC shares hit a 52-week high of Rs. 86.36, up 3%, boosted by iron ore prices surging on China demand hopes. In China, the most-traded iron ore contract rose over 3.5% to 823.5 yuan ($117.90), its highest since late July 2023.

This is a fully government-owned entity under the Ministry of Steel that specializes in the exploration of minerals, including copper, rock phosphate, limestone, magnesite, diamond, and tungsten, and produces a variety of products is now in focus after iron ore prices hit their highest since July.

With a market capitalisation of Rs. 75,609 cr, the shares of NMDC Ltd are currently trading at Rs. 86 per share, increasing 3% in today’s market session, making a high of Rs. 86.36, up from its previous close of Rs. 83.83 per share. The stock touched its 52-week high of Rs. 86.36 today. It has gained 26% over the past six months and delivered a 15% rise in the last month.

What’s the News

Iron ore prices jumped sharply on Wednesday, reaching their highest level in several months. The rise was driven mainly by optimism that demand in China, which is the world’s biggest user of iron ore. This optimism followed a pledge from Beijing to loosen monetary policy, which usually helps boost economic activity.

In China, the most actively traded iron ore contract climbed more than 3.5% during morning trading to 823.5 yuan ($117.90) a metric ton, hitting its highest price since late July 2023. At the same time, iron ore prices in Singapore also moved higher, reaching their strongest level since late February.

The price rally came after China’s central bank said it plans to cut interest rates and reduce banks’ reserve requirements in 2026. These measures are meant to keep plenty of money flowing through the economy and support growth. Investors expect that rate cuts could come in the coming months, lifting confidence across the steel and raw materials markets.

Another factor supporting iron ore prices is the expectation that Chinese steel mills will soon restock their supplies. Many mills currently hold low inventories and are 

About the company 

National Mineral Development Corporation (NMDC) is India’s largest iron ore producer and a Navratna public sector company under the Ministry of Steel. It operates highly mechanized mines in Chhattisgarh and Karnataka and is one of the world’s low-cost iron ore producers. 

NMDC also runs India’s only mechanized diamond mine in Panna, Madhya Pradesh. Currently, it produces over 45 million tons of iron ore annually from its major units at Bailadila and Donimalai, with plans to increase production capacity to 100 million tons by FY2030.

The company shows strong financial performance, with a return on capital employed (ROCE) of 29.6% and a return on equity (ROE) of 23.6%, indicating efficient use of its capital. Its debt-to-equity ratio is very low at 0.11, reflecting a conservative capital structure and minimal reliance on debt.

The stock is trading at a P/E of 10.8, much lower than the industry average of 23.5, making it potentially undervalued. It also offers a healthy dividend yield of 3.86%, with a consistent dividend payout of 34.1%, highlighting the company’s shareholder-friendly approach.

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