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Result Synopsis

NMDC’s Q1FY24 earnings were above the consensus estimates on the back of strong operational performance. NMDC reported its best ever Q1 performance in terms of production and sales in Q1FY24. With price volatility affecting much of the early months of the year, the company was able to sustain realizations which grew by Rs 187/t QoQ. The company’s EBITDA margins improved to 42% and the management seems confident that theses margins are sustainable. The company looks to add 10mt of production capacity by the end of this financial year and seems to be on the right path for its 100mt target by 2030. During the current financial year, NMDC expects to incur Rs. 2,000 crores of capital expenditure, out of which it has already incurred Rs 606 crores till date. In terms of the operational performance, the company reported an iron ore production of 10.70 mt and registered iron ore sales of 10.98 mt recording their highest ever first quarter volumes. Q1 production volumes reported a rise of 20% YoY whereas the sales volumes for the quarter jumped 41% YoY. We maintain our rating on NMDC as a BUY as we believe that the rising domestic iron ore demand in India is expected to remain strong and NMDC plays an important role in being the country’s main iron ore supplier. We value NMDC at 4xFY25E EV/EBITDA to arrive at our target price of Rs 141/sh.

Result Highlights

* Consolidated Revenue for the quarter stood at Rs 53,947 mn (v/s consensus estimate of Rs 55,100 mn), down 8% QoQ & up 13% YoY.

* EBITDA Margins came in at 37% (in-line with the consensus estimate) as compared to 43%/37% in Q1FY23/Q4FY23 respectively. Consolidated EBITDA stood at Rs 22,877 mn, up 6% QoQ and 12% YoY.

* PAT stood at Rs 16,612 mn (v/s consensus estimate of Rs 14,360 mn), down 27% on a QoQ basis and up 13% on a YoY basis.

* Average domestic realizations stood at Rs 4,850/t higher by Rs 187/t as compared to Q4FY23.

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