NMDC - China Opening To Help Iron Ore; Valuation Remains Attractive: Motilal Oswal

Motilal Oswal Report

The Chinese government appears to be focusing on reopening the economy now after three long years of following a strict zero Covid strategy, which has led to significant reduction in gross domestic product growth rate.

China has taken several measures to open its economy in the recent times. These include reducing quarantine period for incoming visitors, doing away with negative virus tests and health code checks to travel domestically not required anymore. The government has in fact stopped reporting cases on a daily basis, indicating its firm resolve to open the economy irrespective of the consequences.

We believe these measures are taken to boost the GDP growth in China which in turn should lead to higher steel production and consequently demand for iron ore and pellets.

We believe NMDC Ltd. will be a beneficiary from rising demand for iron ore globally as the company would increase its production of iron ore and maintain margins, which are sufficient to propel its valuations further, given that it does not have the baggage of steel plant anymore.

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