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Revenue in line; high costs dent earnings Consolidated result

* NMDC’s revenue was in line with our est. at INR49b (+23% YoY), while it was down 9% QoQ. The sequential decline was due to weak NSR & muted volumes.

* Iron ore production stood at 8.3mt (YoY/QoQ: -7%/-10%), while sales came in at 9.9mt (YoY/QoQ: +4%/-1%) during the quarter.

* ASP stood at INR4,954/t (YoY/QoQ: +18%/-8%), in line with our est.

* EBITDA was INR14b (YoY/QoQ: +16%/-41%) vs. our estimate of INR17b. The miss was primarily due to the increase in operating costs. EBITDA/t stood at INR1,395/t (YoY/QoQ: +12% / -40%) vs. our estimate of INR1,679/t.

* APAT for the quarter stood at INR12b (YoY/QoQ: +17%/-39%) against our estimate of INR13b in 2QFY25, on account of muted operating performance.

* For 1HFY25, NMDC posted revenue of INR103b (+10% YoY), EBITDA of INR37b (+17% YoY), and adj. PAT of INR32b (+18% YoY). For 2H, its revenue is likely to grow at 29% YoY, EBITDA at 24% YoY, and APAT at 18% YoY.

* Iron ore production for 1HFY25 stood at 17.5mt and sales volume of 20mt, reporting a decline of 11% YoY and 3% YoY, respectively.

* Average blended NSR for 1HFY25 stood at INR5,167/t, grew by 13% YoY. EBITDA/t grew 20% YoY to INR1,863/t.

* The Board declared bonus shares in the ratio of 2:1.

Valuations remain attractive

* Despite weak volume in 1HFY25, the revenue growth remained healthy, led by better realization. NMDC raised iron ore prices twice in Oct’24, with cumulative hikes of INR1,000/t for lumps and INR800/t for fines. These price hikes will support realizations going forward.

* India’s crude steel capacity is expected to reach 300mt by FY30-31, which will increase the iron ore requirement to ~435-445mt. As NMDC holds 16% of the market share, we believe it is well placed to capitalize on the opportunities ahead.

* NMDC has planned capex for various evacuation and capacity enhancement projects, which are expected to improve the product mix and increase its production capacity to ~100mt by FY29-30E.

* With challenges owing to pending EC clearances and monsoons behind, volume growth is likely to be robust going forward. At CMP, NMDC trades at 4.2x EV/EBITDA on FY27E. We marginally cut our FY25E EBITDA/PAT by 6% each due to weak 2QFY25 performance. We reiterate our BUY rating on NMDC with a revised TP of INR280 (based on 6x Sep’26 EV/EBITDA).

* Key risks: More than 100 iron ore blocks have been auctioned since FY16. When the remaining captive mines become operational, it would lead to a rise in the supply of iron ore, thus intensifying the competition for NMDC.

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