NMDC volume expansion and elevated iron ore prices support earnings outlook
NMDC Ltd.
BUY
₹84
₹86.5
₹98
16.67%
Investment View and 1QFY27 Performance
Motilal Oswal Financial Services Limited (MOFSL) views NMDC’s 1QFY27 earnings as broadly in line with expectations. Healthy iron ore realisations offset weaker sequential volumes, supporting the broker’s reiterated BUY rating and target price of Rs 98. MOFSL expects production volumes and iron ore prices to remain elevated amid strong demand from steel makers.
| Metric | 1QFY27 | Year-on-year change | Quarter-on-quarter change |
|---|---|---|---|
| Consolidated revenue | Rs 68 billion | Flat | Down 19% |
| Iron ore production | 15.1 million tonnes | Up 26% | Down 7% |
| Iron ore sales | 11.8 million tonnes | Up 2% | Down 23% |
| Quarterly blended average selling price | Rs 5,783 per tonne | Down 1% | Up 5% |
| Iron ore average selling price | Rs 5,790 per tonne | Up 8% | Up 19% |
| Reported EBITDA | Rs 24.7 billion | Flat | Down 3% |
| EBITDA per tonne | Rs 2,100 | Down 2% | Up 27% |
| Adjusted profit after tax | Rs 19.8 billion | Flat | Up 1% |
Revenue, reported EBITDA and adjusted profit after tax were broadly in line with MOFSL’s estimates. The stronger realisations cushioned the impact of muted sequential sales volumes, while EBITDA per tonne improved significantly quarter on quarter.
Production Expansion and Diversification Outlook
Management has guided for production of about 60 million tonnes in FY27, supported by an increase in the environmental-clearance limit and a new mine under a joint venture.
NMDC has a substantial capital-expenditure pipeline across evacuation and capacity-enhancement projects. These initiatives are intended to improve the product mix and raise production capacity to about 100 million tonnes by FY30.
MOFSL also identifies NMDC’s planned diversification into coking and non-coking coal mines, critical minerals and rare earth elements as potential long-term sources of incremental revenue and EBITDA.
MOFSL Forecasts
MOFSL has largely retained its FY27E and FY28E forecasts. The FY27E iron ore volume estimate remains 55.7 million tonnes, while the FY28E volume estimate is unchanged at 58.5 million tonnes. The broker raised its FY28E blended average selling price by 1.1% to Rs 5,808 per tonne, resulting in higher revenue, EBITDA and adjusted profit after tax estimates.
| Metric | FY27E | FY28E | FY28E change |
|---|---|---|---|
| Iron ore volume | 55.7 million tonnes | 58.5 million tonnes | Unchanged |
| Blended average selling price | Not stated | Rs 5,808 per tonne | Up 1.1% |
| Revenue | Rs 318 billion | Rs 339 billion | Up 1.1% |
| EBITDA | Rs 108 billion | Rs 119 billion | Up 2.0% |
| Adjusted profit after tax | Rs 85 billion | Rs 93 billion | Up 1.6% |
Valuation and Target Price Calculation
At the report CMP of Rs 84, NMDC traded at 5.4 times FY28E EV/EBITDA and 1.6 times FY28E price to book value. MOFSL values NMDC at 6.5 times FY28E EV/EBITDA.
| Target-price component | Value |
|---|---|
| FY28E volume | 58.5 million tonnes |
| FY28E EBITDA per tonne | Rs 2,004 |
| Target EBITDA | Rs 119.49 billion |
| Net cash added | Rs 94.922 billion |
| Implied equity value | Rs 871.610 billion |
| Target price | Rs 98 per share |
Key Sensitivities and Investment Thesis
The near-term operating sensitivity evident in the quarter is to iron ore sales volumes and realisations. The investment thesis depends on planned volume growth, sustained demand from steel makers, capacity additions and successful execution of the diversification strategy.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
