NMDC, JSW Steel could benefit in the medium term: Edelweiss. Check its position on these 2 metal stocks

India’s Supreme Court has raised the cap on iron ore mining in Karnataka to 50 tonnes from 35 tonnes. Brokerage firm Edelweiss says the development is significant as it could incentivize iron ore mining companies such as NMDC to increase capacity, involves additional iron ore security for JSW’s Vijayanagar expansion Steel and could pave the way for the auctioning of more iron ore mines in Karnataka. .

Although immediate benefits are unlikely, the development expands the possibility for NMDC and JSW Steel to pursue their respective medium-term expansion plans, according to the brokerage. Edelwiess maintained its “Buy” rating on NMDC shares with a price target of 152 and a “reduced” position in JSW Steel metals stock with a target price of 471.

“We believe that NMDC can now increase production capacity at Donimalai and Kumaraswamy. This, coupled with the online auction of iron ore conducted directly by the company (and not through the oversight board), can enhance NMDC’s incremental profitability in the Karnataka sector,” the memo reads.

In the case of JSW Steel, the greater availability of high-grade iron ore in Karnataka is a boost for its Vijayanagar operations. In addition, by reducing the cost of existing operations, it should enable the company to participate in the auctioning of Class A and B mines in the future and improve its captive iron ore base, it said. -he adds.

“We see the recent SC judgment increasing the iron ore production cap in Karnataka as a welcome step, benefiting all stakeholders: i) NMDC is likely to benefit from a higher production cap in Bellary by applying potentially higher CE limits for the Donimalai and Kumaraswamy mines; ii) JSW Steel should benefit from greater availability of iron ore for existing operations and ongoing expansion at Vijayanagar; iii) Government of Karnataka can take advantage of future Class A and Class B mine auctions, generating higher royalties,” Edelweiss said.

Although the brokerage sees no immediate upside as the regulations will unfold in due course, it expects medium-term gains for NMDC, the main iron ore producer, and JSW Steel, the main ore consumer. of iron, in Karnataka.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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