Buy NMDC Ltd for the Target Rs.100 by Motilal Oswal Financial Services Ltd
In-line performance;
outlook bright Consolidated result highlights
* 3QFY26 revenue stood at INR76.1b (vs. our est. of INR71.1b), rising 16% YoY and 19% QoQ, primarily driven by improved volumes and better NSR.
* Iron ore production stood at 14.7mt (+11% YoY and +44% QoQ), while sales came in at 12.7mt (+6% YoY and +19% QoQ).
* ASP stood at INR5,993/t (+9% YoY and +1% QoQ).
* EBITDA stood at INR21.4b (-10% YoY and +8% QoQ) and was in line with our estimate. EBITDA/t came in at INR1,688/t (-15% YoY and -9% QoQ), against our est. of INR1,766/t.
* APAT stood at INR17.6b (-7% YoY and +3% QoQ), against our estimate of INR17.4b.
* During 9MFY26, revenue/EBITDA grew 23%/9% YoY to INR207.3b/INR66.2b, primarily supported by volume growth and healthy realization. 9MFY26 adj. PAT increased 7% YoY to INR54.2b. In 9MFY26, sales volume rose 10% YoY to 34.9mt and ASP increased 11% YoY to INR5,934/t.
Valuation and view
* NMDC reported decent earnings during the quarter, supported by healthy volume and NSR. Going forward, we expect volumes to pick up steadily to ~51mt in FY27 and 54mt in FY28, fueled by an increasing EC limit. We largely maintain our estimates for FY27/28 and expect volumes and prices to remain elevated, in line with strong demand from steel makers.
* NMDC has planned capex of over INR700b for various evacuation and capacity enhancement projects, aimed at improving the product mix and increasing production capacity to ~100mt by FY29-30.
* Additionally, NMDC is expected to generate strong OCF over FY26-28. This will support its capex plan without overleveraging.
* At CMP, the stock trades at 5.3x EV/EBITDA and 1.8x on P/BV on FY27 estimate. We reiterate our BUY rating on NMDC with a TP of INR100 (based on 6.5x EV/EBITDA on Sep’27 estimate).
* Key risks – a) rising competition from captive iron ore mining, b) Karnataka mineral tax demand, which could impact earnings if ruled against NMDC, and c) delay in acquiring the target EC limits.
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