NMDC - Price cut on expected lines - Kotak

As per media reports, NMDC has cut prices of iron ore lumps by Rs200/ton ( 4%) and fines by Rs100/ton (4%) for July 2013. Price cuts were expected after similar cuts from other large miners in Odisha. The challenging state of end-user industry (especially sponge iron) due to weak domestic steel demand, seasonally weaker off-take during monsoons and inventory build-up in FY2013 are the reasons behind the price cuts, in our view.

Our investment thesis on NMDC is predicated on restricted iron ore supplies amid revival of end-user demand (even modest) in the domestic market. Our assumption already factors in the price cuts. We maintain BUY.

Source : Equity Bulls

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