NMDC volume ramp-up and logistics capex support iron ore growth outlook

Investment View and Valuation

Prabhudas Lilladher’s June 02, 2026 result update describes NMDC’s Q4FY26 performance as inline. The broker retained its Accumulate rating and raised the target price to Rs 97 from Rs 95, against a report CMP of Rs 92.

The constructive view is based on higher near-term iron ore pricing, volume growth from mine ramp-ups and diversification into higher-margin businesses, including pellets and coal mining. The target price is based on 5.5x March 2028E EBITDA, compared with the earlier 5x multiple, reflecting stronger iron ore pricing, expected higher volumes and diversification.

Q4FY26 Financial Performance

NMDC reported consolidated Q4FY26 revenue of Rs 113.4 billion, up 62 per cent year on year and 49 per cent quarter on quarter, exceeding PL’s estimate of Rs 91.7 billion. Iron ore sales volume rose 21 per cent year on year to 15.29 million tonnes, while average realisation increased around 3 per cent sequentially to Rs 4,876 per tonne, despite a January 2026 price cut followed by minor hikes during the quarter.

EBITDA benefited from higher HRC sales from NSL, estimated at around Rs 1.11 billion before selling expenses. The report notes that this HRC trading was temporary, with no trading expected in Q1FY27. Blended EBITDA per tonne increased 7 per cent year on year to Rs 1,729, although it would have been lower excluding NSL trading. PAT increased 36 per cent year on year to Rs 20.17 billion, broadly in line with PL’s Rs 20.1 billion estimate.

Iron Ore Production and Volume Ramp-Up

Management maintained FY27E iron ore production guidance of 60 million tonnes and reiterated its objective of reaching more than 100 million tonnes of iron ore capacity by the end of the decade. Around 10 million tonnes had been produced in the first two months of FY27, including about 5.3 million tonnes in May 2026.

Deposit-4, operated under NCL Ltd, the NMDC-CMDC joint venture, is expected to commence commercial mining in July 2026. It is expected to contribute 1 million tonnes in FY27E and 2 million tonnes in FY28E, with eventual peak capacity of 7 million tonnes. Deposit-13 is expected to begin after the monsoon in Q2FY27, contributing 0.5 million tonnes in FY27E and 2 million tonnes in FY28E.

Incremental production is also expected from Deposit-14, NMZ, Kumaraswamy and Deposit-5.

Margins, Capex and Logistics Infrastructure

Management guided for FY27E EBITDA margins of 42–43 per cent, assuming broadly range-bound iron ore and steel prices and further reductions in cost of production.

• FY26 capex was Rs 33 billion.
• FY27E capex guidance is around Rs 50–60 billion.
• Annual capex could rise to Rs 70–100 billion as NMDC builds evacuation infrastructure and expands mining capacity.
• Major FY27 tenders of Rs 150–200 billion are expected.

The 15 million-tonne Bacheli–Nagarnar slurry pipeline is mechanically complete and targeted for commissioning in June or July 2026. The planned doubling of the KK rail line by December 2026 is another volume and logistics catalyst.

NMDC is also developing a Rs 30 billion Vizag blending yard to market branded iron ore with consistent specifications and potentially premium pricing.

Diversification into Coal and Other Businesses

Management expects Tokisud thermal coal production to begin in Q2FY27, with FY27E output of 0.75–1 million tonnes and peak capacity of 2.3 million tonnes. The Rohne coking coal mine could commence by the end of Q3FY27, subject to regulatory approvals, and has peak capacity of 8 million tonnes.

Higher contribution from the NSL trading business supported Q4FY26 results, although the report notes that HRC trading was temporary and is not expected to recur in Q1FY27.

Estimates and Valuation

PL models sales volumes of 55.8 million tonnes in FY27E and 62.9 million tonnes in FY28E. It forecasts FY26–FY28E revenue, EBITDA and PAT CAGRs of 16 per cent, 22 per cent and 19 per cent, respectively.

PL raised FY27E EBITDA by 6.5 per cent and reduced FY28E EBITDA by 1.5 per cent, reflecting near-term pricing and assumed coal-mine volumes.

Key Risks and Considerations

• Execution of new mines and logistics projects.
• Ability to raise prices amid domestic and imported ore availability.
• Dependence on internal accruals for capex.
• Receivables from NSL and RINL.

As of March 31, 2026, NMDC had Rs 45 billion due from NSL for iron ore sales and Rs 45.86 billion due from RINL, with expected credit-loss provisions recognised. Management expects recovery from NSL within 18 months and recovery from RINL in due course.