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Stepping up capex; higher pricing to aid in H1

NMDC reported inline Q4FY26 performance led by sharp recovery in volumes and higher contribution from NSL trading business. Cons. revenue grew 62% YoY driven by 21% YoY growth in iron ore sales volumes to 15.3mt. NSR remained strong on improved premiums and minor hikes taken during the quarter. NMDC sold higher quantities of HRC to support NSL which is not going to continue. Management maintained FY27E iron ore production guidance at 60mt and reiterated its long-term target of achieving 100mt capacity by 2030, supported by ramp-up of Deposit-4, Deposit-13 and EC extension across existing mines. Capex guidance for FY27 stands at ~INR60bn, while annual capex could rise to INR 70-100bn over the next few years as NMDC would undertake evacuation capex to support mining ramp up.

Mgmt. expects iron ore prices to remain largely range-bound in near term, while maintaining EBITDA margins at 42-43% aided by further reduction in cost of production. Key catalysts to watch out are:

1) Ramp-up in production from new mines

2) Commissioning of slurry pipelines and logistics infra which would help save costs and ramp up volumes

3) Completion of doubling of KK rail line by Dec’26

4) Ability to undertake price hikes amid rising domestic and imported ore availability. We change our EBITDA estimates for FY27/28E by +6.5%/-1.5% on higher near-term pricing and assuming coal mines’ volumes. We model in 55.8/62.9mt volumes for FY27/28E and expect NMDC to deliver Revenue/EBITDA/PAT CAGR of 16%/22%/19% respectively. At CMP, the stock is trading at 5.4x/5.2x EV of FY27/28E EBITDA. We maintain ‘Accumulate’ with a revised TP of INR 97 (earlier INR 95) assigning a higher multiple of 5.5x (earlier 5x) EV of Mar’28E EBITDA due to higher iron ore pricing, focus on higher volumes and diversification into newer businesses with healthy profit margins such as pellets and coal mining.

Strong volume recovery drives robust topline growth:

Consolidated revenue grew 62% YoY to INR 113.4bn (+49% QoQ; PLe 91.7bn) on strong 21% YoY volume growth on low base quarter affected by employee strike. Iron ore revenue was up 17% YoY to INR 74.55bn while other division (pellet/NSL trading) revenue grew 6x YoY to INR 40.62bn. Iron ore sales volumes were up 21% YoY to 15.29mt while average ore realization was up ~3% QoQ to INR 4,876/t (-3% YoY; better than PLe 4,695) despite price cut taken in Jan’26 before taking minor hikes later during the quarter.

EBITDA aided by higher selling of HRC from NSL:

Consolidated EBITDA grew 29% YoY to INR 26.43bn (+23% QoQ; PLe 26.34bn) aided by higher selling of HRC from NSL (~Rs1.11bn EBITDA ex-selling expenses). On cons level, other expenses/t was down 35% YoY to INR 548, while employees cost increased 3% YoY to INR 445/t. Royalty and cess per ton was down 8% YoY to INR 2,116/t (down 10% QoQ). Freight costs per ton was up 19% YoY INR 149 while consumption of stores & spare parts was up 20% YoY at INR 197/t. Blended cons EBITDA/t was up 7% YoY to INR 1,729 (2% QoQ; PLe INR 1,723/t). Ex-NSL trading blended EBITDA/t would have been lower. Consolidated PAT was up 36% YoY to INR 20.17bn (+15% QoQ; PLe INR 20.1bn).

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