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Results Synopsis

NMDC’s Q3FY25 performance was marginally in-line with consensus expectations on account of rising realizations as well as higher volumes after a poor monsoon hit Q2FY25. The realization/t for the quarter stood at Rs 5,389/t vs Rs 4,876/t during Q2FY25. Net revenue from operations grew 33% QoQ and 21% YoY coming in at Rs 65,678 mn, with EBITDA up 71% QoQ and 18% YoY at Rs 23,720 mn.

On the operational front, the production and sales volumes both showed strong recovery after the monsoon season. Production volumes for the quarter stood at 13.29 mt vs 8.28 mt during Q2FY25. Sales volumes for the quarter stood at 11.94 mt vs 9.74 mt during Q2FY25.

Result Highlights

* Consolidated Revenue from operations for the quarter stood at Rs 65,678 mn (vs our estimate of Rs 65,127 mn) up 33.5% QoQ and c.21% YoY, driven by higher iron ore volumes and the price hike that kicked in during the start of the quarter.

* Absolute EBITDA for the quarter stood at Rs 23,720 mn (vs our estimate of 25,975 mn). EBITDA margins stood at c.36% for the quarter vs 28% in Q2FY25 and 37% in Q3FY24.

* Net profit for the quarter stood at Rs 18,820 mn (vs our estimate of Rs 21,013 mn), up 55% QoQ and 27% YoY.

* Production for the quarter stood at 13.29 mt vs 8.28 mt during Q2FY25.

* Sales volumes stood at 11.94 mt vs 9.74 mt during Q2FY25.

* Realization/t for iron ore stood at Rs 5,389/t vs Rs 4,876/t benefitting from the price hike NMDC took during early-October.

Valuation and View

We project Revenue/EBITDA/PAT growth for NMDC at a CAGR of 7%/2%/1%, over FY24-27E. Our assumptions see an increase in the volumes from FY24-27E at a 9.2% CAGR however, a falling global iron ore pricing environment is expected to limit margins going forward.

We rollover our estimates to FY27E and value NMDC at 6x FY26E EV/EBITDA to arrive at our revised target price of Rs 75/sh.

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