Accumulate NMDC; target of Rs 253: Prabhudas Lilladher

Prabhudas Lilladher's research report on NMDC

We cut our FY25/26E EBITDA by ~2%/9% on lower iron ore price assumptions. NMDC’s Q1FY25 EBITDA grew 17% YoY to Rs23bn (+11% QoQ) on better realization. Volumes declined 8% YoY on production disruption due to conflict with employees on wage revision in May’24. Average realization improved 3% QoQ to Rs5,300/t as NMDC had announced two price hikes during Q1FY25. NMDC maintained its volume guidance at ~50/54mt in FY25E/FY26E. We factor in volumes at 47.2/52.7mt while cutting iron ore pricing assumption as NMDC has taken price cuts in the domestic market twice in Q2FY25 amid falling steel price scenario. NMDC is investing Rs500bn for augmenting mining capacities to ~100mtpa by FY31E along with evacuation infrastructure. NMDC is well placed to capitalize on strong volume growth in domestic steel markets over the next few years given its increased focus on mining business, which is expected to deliver ~9% CAGR over FY24- 26E. We expect revenue/EBITDA/PAT growth of 13%/19%/17% over FY24-26E.

Outlook

At CMP, the stock is trading at 6.3x/5x EV of FY25E/FY26E EBITDA. We maintain ‘Accumulate’ rating with a revised TP of Rs253 (earlier Rs276) valuing at 6x EV of Mar’26E EBITDA.