NMDC’s 100 MT iron ore plan offsets near-term price and capex headwinds

Investment View and Near-Term Outlook

ICICI Direct Research’s August 17, 2026 company update on NMDC Ltd retains a HOLD rating with a target price of Rs 90. The broker views NMDC as well positioned for long-term growth because of its target to reach 100 million tonnes per annum of iron ore production by FY30. However, near-term upside is considered limited by range-bound iron ore prices and elevated capital expenditure.

Iron Ore Business and Long-Term Demand Opportunity

NMDC is India’s largest iron ore mining company, with around 50 million tonnes of iron ore production in FY26. It operates seven iron ore mining leases with total reserves of around 1,700 million tonnes and an average iron content grade of around 64 per cent.

ICICI Direct sees a structural demand opportunity from India’s low per-capita steel consumption of around 103 kg, compared with a global average of around 215 kg. The government’s aim to raise per-capita steel consumption to 160 kg by 2030-31 and expand crude steel capacity to 300 million tonnes could increase iron ore demand to around 430 million tonnes.

Q1 FY27 Financial Performance

Q1 FY27 performance was steady. NMDC reported total operating income of Rs 6,795 crore, up 0.8 per cent year on year, while iron ore sales volume rose 1.8 per cent year on year to 11.7 million tonnes. Blended realisations increased 3.6 per cent year on year to Rs 5,548 per tonne.

Sequentially, sales volume declined from 15.3 million tonnes in Q4 FY26. However, realisations and EBITDA per tonne improved from Rs 4,759 and Rs 1,731 respectively in the preceding quarter.

Production Growth and Capital Expenditure

Management has guided for 60 million tonnes of iron ore production in FY27, supported by the ramp-up of newly commissioned mines. NMDC plans capital expenditure of around Rs 50,000 crore across its mining operations.

The investment programme includes capacity enhancement at Kirandul, Bacheli and Donimalai through crushing, screening and beneficiation facilities. It also includes a 15 million tonnes per annum slurry pipeline and upgrades to evacuation infrastructure.

Diversification into Critical Minerals and Coal

NMDC is diversifying beyond iron ore into critical minerals including gold, diamonds, lithium, nickel, cobalt and rare earth elements. Operations have commenced at the Tokisud North coal block, which has peak production capacity of around 2.3 million tonnes per annum.

The Rohne coking coal mine, with peak capacity of around 8 million tonnes per annum, is expected to be commissioned in Q3 FY27. ICICI Direct expects these initiatives to diversify revenue and support longer-term earnings resilience.

Broker Estimates and Valuation

Following Q1 FY27, ICICI Direct reduced its FY27E and FY28E sales-volume estimates by 2.8 per cent and 4.6 per cent to 53.5 million tonnes and 57.2 million tonnes respectively. Revenue estimates were reduced by 12.8 per cent for FY27E and 14.8 per cent for FY28E, while PAT estimates were cut by 1.8 per cent and 1.5 per cent.

The target price of Rs 90 is based on 6 times FY28E EV/EBITDA.

Key Risks and Catalysts

• Key downside risk: A delay in the ramp-up of iron ore mines could affect medium-term volume-growth targets.
• Positive estimate variance: Higher-than-expected EBITDA per tonne would be favourable compared with the broker’s estimates.
• Regulatory development: The MMDR Amendment Bill 2026 restricts state governments from imposing new taxes, reducing uncertainty around potential additional taxation on NMDC’s Karnataka mines.