NMDC volume growth and FY30 capacity expansion underpin Motilal Oswal's positive outlook

Investment View and Valuation

Motilal Oswal Financial Services reiterated its Buy rating on NMDC with a target price of Rs 106 in its June 1, 2026 results update. The broker remains positive on NMDC’s outlook, supported by healthy iron ore volumes, expected elevated volumes and prices amid strong steel-maker demand, a sizeable capacity-expansion programme, and prospective diversification into coal, critical minerals and rare earth elements.

At the report CMP of Rs 92, NMDC traded at 6.1 times FY28E EV/EBITDA and 1.7 times FY28E price-to-book value.

4Q FY26 and FY26 Financial Performance

NMDC’s consolidated reported revenue in 4Q FY26 was Rs 11,300 crore, including Rs 3,000 crore of third-party value-added sales. Management said the HR coil trading arrangement supporting NMDC Steel’s working-capital requirements was temporary and would not recur. Revenue excluding third-party sales was Rs 8,400 crore, up 20% year-on-year and 22% quarter-on-quarter, but below Motilal Oswal’s Rs 8,900 crore estimate.

Iron ore production was 16.3 million tonnes, up 22% year-on-year and 11% quarter-on-quarter, while sales were 15.3 million tonnes, up 21% on both comparisons. Blended average selling price was Rs 5,488 per tonne, flat year-on-year and sequentially. Iron ore average selling price was Rs 4,873 per tonne, down 3% year-on-year and up 3% quarter-on-quarter.

For FY26, NMDC reported revenue of Rs 28,400 crore, up 9% year-on-year; EBITDA of Rs 9,030 crore, up 11%; and adjusted profit after tax of Rs 7,220 crore, up 10%. Annual production rose 21% to 53.2 million tonnes, sales increased 13% to 50 million tonnes and blended average selling price increased 5% to Rs 5,657 per tonne.

Production Guidance and Capacity Expansion

Management expects iron ore prices to remain broadly range-bound in the near term. It guided for FY27 production of 60 million tonnes, comprising 58.5 million tonnes of standalone production and output from the newly commissioned NMDC-CMDC joint-venture Deposit 4 and Deposit 13 mines.

Bacheli mining cost fell from about Rs 1,000 per tonne to Rs 810 per tonne in FY26. Management expects further improvement in FY27 and an iron ore EBITDA margin of 42–43%.

NMDC plans capex of Rs 6,000 crore in FY27, after Rs 3,300 crore in FY26, followed by Rs 7,000–10,000 crore annually in FY28–FY30. The company targets 100 million tonnes of iron ore capacity by FY30, supported by expansion at Kirandul and Bacheli, Karnataka production and new deposits.

The Kirandul–Jagdalpur rail-doubling project could initially raise evacuation capacity from 28–30 million tonnes per annum to about 40 million tonnes per annum and subsequently to 60 million tonnes per annum. However, management said the FY27 output target does not depend on the project.

Broker Estimate Changes and Target Price Basis

The broker largely maintained its FY27E and FY28E profit estimates while raising volume assumptions by 8.6% and 9.3% to 55.7 million tonnes and 58.5 million tonnes, respectively. It lowered blended average selling-price assumptions by 2.2% and 2.7%, resulting in revenue estimate increases of 6.2% and 6.3%, but EBITDA estimate reductions of 4.0% and 3.7%.

The Rs 106 target price is based on 7 times FY28E EV/EBITDA, using FY28E volume of 58.5 million tonnes, EBITDA per tonne of Rs 2,004 and net cash of Rs 9,394 crore.

Key Execution Considerations

• Delivery of the planned capacity-expansion and evacuation projects.
• Execution of the company’s planned diversification investments in coal, critical minerals and rare earth elements.
• Continuation of supportive iron ore demand and pricing conditions.