NMDC volume ramp-up and pricing support earnings as mine expansion accelerates

Investment View and Target Price

Prabhudas Lilladher (PL) characterises NMDC’s Q4 FY26 performance as inline, supported by a sharp recovery in volumes and a higher contribution from NMDC Steel Limited (NSL) trading. The broker maintains its Accumulate rating and raises the target price to Rs 97 from Rs 95.

The revised target reflects higher near-term iron ore pricing, a focus on volume growth and diversification into higher-margin businesses, including pellets and coal mining.

Q4 FY26 Financial Performance

Consolidated revenue increased 62% year on year and 49% quarter on quarter to Rs 113.4 billion, exceeding PL’s estimate of Rs 91.7 billion. Iron ore sales volumes rose 21% year on year to 15.29 million tonnes, aided by a low base affected by an employee strike in Q4 FY25.

Revenue from other divisions, including pellet and NSL trading, increased six times year on year to Rs 40.62 billion. Average iron ore realisation was Rs 4,876 per tonne, down 3% year on year but up about 3% sequentially and ahead of PL’s estimate of Rs 4,695 per tonne. This was despite a price cut in January 2026 followed by minor price increases during the quarter.

EBITDA and Profitability

Consolidated EBITDA rose 29% year on year to Rs 26.43 billion, broadly in line with PL’s estimate of Rs 26.34 billion. EBITDA was supported by higher HRC sales from NSL, which contributed about Rs 1.11 billion before selling expenses. The HRC trading was temporary in Q4 FY26 and did not continue in Q1 FY27.

The consolidated EBITDA margin declined to 23.3% from 29.3% a year earlier, while blended EBITDA per tonne increased 7% year on year to Rs 1,729. PL notes that EBITDA per tonne would have been lower excluding NSL trading. Consolidated PAT grew 36% year on year to Rs 20.17 billion, broadly matching PL’s estimate of Rs 20.1 billion.

Production Ramp-up and Capacity Expansion

Management retained its FY27E iron ore production guidance of 60 million tonnes and reiterated its ambition to achieve more than 100 million tonnes of iron ore capacity by 2030. The production ramp-up is expected to be supported by Deposit-4, Deposit-13 and environmental-clearance expansion at existing mines.

• Deposit-4: Operated under NCL Limited, the NMDC-CMDC joint venture, Deposit-4 has opened and is expected to begin commercial mining in July 2026. It is expected to contribute 1 million tonnes in FY27E and 2 million tonnes in FY28E, eventually reaching peak capacity of 7 million tonnes.
• Deposit-13: Expected to commence in Q2 FY27 after the monsoon, Deposit-13 is expected to contribute 0.5 million tonnes in FY27E and 2 million tonnes in FY28E. Its initial rated capacity is above 10 million tonnes.
• Other volume additions: Incremental FY27 volumes are also expected from Deposit-14, NMZ, Kumaraswamy and Deposit-5.

Management said production was tracking well, with about 10 million tonnes produced in the first two months of FY27 and about 5.3 million tonnes produced in May 2026.

Pricing, Margins and Capex Outlook

Management expects near-term iron ore prices to remain largely range-bound and aims to maintain EBITDA margins of 42–43% through further reductions in the cost of production.

NMDC has guided for around Rs 60 billion of capex in FY27. Annual capex could rise to Rs 70–100 billion thereafter, driven by evacuation infrastructure required to support mining growth.

Key developments to monitor include the ramp-up of new mines, commissioning of the slurry pipeline and logistics infrastructure, completion of the KK rail-line doubling by December 2026, and NMDC’s ability to raise prices amid domestic and imported ore availability.

Earnings Estimates and Valuation

PL raises its FY27E EBITDA estimate by 6.5% and FY27E EPS estimate by 9.5%, while reducing FY28E EBITDA by 1.4%. The revisions reflect higher near-term pricing and assumed coal-mine volumes.

At the report CMP, PL calculates valuation at 5.4 times FY27E EV/EBITDA and 5.2 times FY28E EV/EBITDA. Its Rs 97 target price is based on 5.5 times March 2028 EBITDA of Rs 136.85 billion, compared with the earlier multiple of 5 times.

Key Risk: NSL and RINL Receivables

A material concern remains the receivables due from NSL and RINL. As of March 31, 2026, NMDC had the following amounts due from NSL:

• Rs 45 billion for iron ore sales.
• Rs 1.51 billion for employee services.
• Rs 1.79 billion as an HRC purchase advance.
• An expected credit loss of Rs 0.41 billion was recognised.

RINL receivables stood at Rs 45.86 billion, against which NMDC recognised an expected credit loss of Rs 1.27 billion. Management expects recovery from NSL within 18 months and expects recovery from RINL in due course.