Hold NMDC; target of Rs 250: Sharekhan

Sharekhan's research report on NMDC

Consolidated PAT at Rs. 1,971 crore was up 19% y-o-y and led by a beat in EBITDA margins due to decrease in royalty payments. EBITDA/tonne rose 28% y-o-y to Rs. 2,323 and EBITDA of Rs. 2,340 crore was up 17% y-o-y. Revenue of Rs. 5,414 crore was almost flat y-o-y with a fall in volumes compensated by rise in realizations. Iron ore realizations are under pressure currently with the weak outlook of the steel sector. NMDC has taken two price cuts with a cumulative amount of Rs. 1000/tonne after the first quarter. Company has guided for a production volume of 50mt in FY25 and 54mt in FY26 from 45mt in FY24.

Outlook

NMDC will deliver good volume growth over the next few years in tandem with India’s steel sector demand. But we downgrade the stock to Hold currently with a revised PT of Rs. 250 given the uncertain outlook on the pricing front. The stock trades at a 5.4x its FY26 EV/EBITDA.