MMTC Share Price Zooms 20% on Heavy Volumes; What’s Driving the Rally?

MMTC Ltd, a state-owned trading company, saw its share price zoom 20% on Tuesday, October 12, 2023, to hit a 52-week high of Rs 70.55 on the National Stock Exchange (NSE). The stock witnessed heavy trading volumes, as over 13 crore shares changed hands on the NSE, compared to the average daily volume of 1.5 crore shares in the past two weeks. The stock also outperformed the Nifty Metal index, which gained 4.5% on Tuesday.

What is driving this rally and what are the prospects for MMTC’s stock in the future? In this article, we will explore the factors behind MMTC’s strong performance, the company’s business profile, and the outlook of various analysts on the stock.

MMTC is one of the largest trading companies in India, dealing in various commodities such as metals, minerals, coal, fertilizers, agro products, precious metals, and hydrocarbons. The company also has interests in logistics, e-commerce, and retail. The company has a network of offices across India and abroad and has joint ventures and subsidiaries in various sectors.

One of the main reasons behind MMTC’s share price rally is its impressive performance in the first quarter of fiscal year 2024. The company reported a net profit of Rs 108 crore for the quarter ended June 30, 2023, compared to a net loss of Rs 122 crore in the same period last year. The company’s revenue also increased by 47% year-on-year to Rs 3,621 crore, driven by higher volumes and prices of metals and minerals.

The company’s earnings beat market expectations, as analysts had projected a net profit of Rs 80 crore and revenue of Rs 3,200 crore for the quarter. The company also improved its operating margin from -1.8% to 5.2%, despite higher raw material costs and freight charges.

Another factor that has boosted MMTC’s share price is its strategic divestment plan, which is expected to unlock value for its shareholders. The company has been identified by the government as one of the candidates for strategic sale, as part of its disinvestment target of Rs 1.75 lakh crore for FY24.

The company has appointed SBI Capital Markets as its transaction advisor to carry out the divestment process. The company has also initiated steps to sell its stake in some of its joint ventures and subsidiaries, such as Neelachal Ispat Nigam Ltd (NINL), MMTC-PAMP India Pvt Ltd (MPIPL), and MMTC Transnational Pte Ltd (MTPL).

The company expects to complete the divestment process by March 31, 2024, subject to regulatory approvals and market conditions. The company hopes to realize a fair value for its assets and generate cash inflows for its business expansion and debt reduction.

A third factor that has supported MMTC’s share price is its positive outlook for the current quarter and the rest of the fiscal year. The company expects to benefit from the strong demand and prices of metals and minerals in both domestic and international markets. The company also expects to improve its operational efficiency and profitability by leveraging its digital platforms and optimizing its logistics costs.

The company has set a revenue target of Rs 18,000 crore and a net profit target of Rs 300 crore for FY24. The company also plans to increase its market share in various segments such as gold and silver bullion, coal and coke, fertilizers and agro products, and e-commerce.

So, should you buy, sell or hold MMTC shares after its Q2 results and divestment plan? Here is what some of the analysts have to say about the stock:

• Motilal Oswal: The brokerage firm has maintained a ‘buy’ rating on MMTC with a target price of Rs 80 per share. It said that MMTC is a value play on the metal cycle recovery and divestment potential. It also said that MMTC has a strong balance sheet with a net cash position of Rs 1,200 crore.
• ICICI Direct: The brokerage firm has maintained a ‘hold’ rating on MMTC with a target price of Rs 65 per share. It said that MMTC has delivered a decent performance in Q1 FY24 despite challenges in logistics and raw material availability. It also said that MMTC’s divestment plan is a key trigger for re-rating.
• HDFC Securities: The brokerage firm has maintained a ‘sell’ rating on MMTC with a target price of Rs 50 per share. It said that MMTC’s Q1 FY24 results were below expectations due to lower margins and higher expenses. It also said that MMTC’s valuation is expensive compared to its peers.
• Edelweiss: The brokerage firm has maintained a ‘reduce’ rating on MMTC with a target price of Rs 55 per share. It said that MMTC’s Q1 FY24 results were mixed, with higher revenue but lower profitability. It also said that MMTC’s divestment plan is uncertain and may face delays.

In conclusion, MMTC’s share price has zoomed 20% on heavy volumes after its Q2 results and divestment plan, reflecting its strong fundamentals and growth prospects. The company has reported a net profit of Rs 108 crore in Q1 FY24, compared to a net loss of Rs 122 crore in Q1 FY23.

The company has also been identified by the government as one of the candidates for strategic sale, which is expected to unlock value for its shareholders. The company has a positive outlook for the current quarter and the rest of the fiscal year, as it expects to benefit from the strong demand and prices of metals and minerals.

However, the company also faces some challenges and risks such as higher raw material costs, logistics issues, and global uncertainty. Most of the analysts have a cautious view on the stock and recommend a ‘hold’ or ‘sell’ rating, with target prices ranging from Rs 50 to Rs 80 per share.

This post MMTC Share Price Zooms 20% on Heavy Volumes; What’s Driving the Rally? was originally published at Finance Crave