Accumulate NMDC; target of Rs 70: Prabhudas Lilladher

Accumulate

Prabhudas Lilladher's research report on NMDC

NMDC’s Q3FY25 was largely in-line led by better than expected NSR on two price increases taken in prior quarter while volumes grew 5% YoY as demand started picking up. NSR grew 11% QoQ to Rs5389/t; 5% ahead of PLe. Cons EBITDA/t at Rs1,987 was tad weaker than PLe (Rs2,061/t) on higher freight and other expenses. NMDC has started delivering 5mt+ in recent months which is expected to drive Q4 volume growth; although constrained by evacuation bottlenecks at old siding at Kirandul. As iron ore prices remain weaker globally, NMDC might have to incur small cuts over next few months, which would keep NSR soft. While NMDC has guided for volumes of ~47.8/53/60mt for FY25/26/27E, we factor in 46.5/51.4/56mt (earlier 45.9/50/54mt) while keeping softer iron ore pricing assumptions. Mgmt. has raised its tentative capex to reach 100mtpa by FY31E to Rs700bn from Rs500bn announced earlier. Although this amount would evolve as NMDC is still in early stages of finalizing the capex program and actual capex can defer depending upon ore pricing and its balance sheet.

Outlook

At CMP, the stock is trading at 4.5x EV of FY26E/27E EBITDA. We maintain ‘Accumulate’ rating with a revised TP of Rs70 (earlier Rs80) valuing it at a lower multiple of 5x EV of Sep’26E EBITDA (earlier 6x) on increased uncertainties for EBITDA growth.

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NMDC - 12022025 - prabhu