Buy NMDC Ltd for the Target Rs. 88 by Motilal Oswal Financial Services Ltd
Broadly in-line performance
Consolidated result highlights
* 2QFY26 revenue stood at INR63.8b (vs. our est. of INR60.2b), up 30% YoY but down 5% QoQ, primarily affected by muted volumes.
* Iron ore production stood at 10.2mt (+23% YoY and -15% QoQ), while sales came in at 10.7mt (+10% YoY and -8% QoQ).
* ASP stood at INR5,989/t (+18% YoY and +2% QoQ), led by a higher contribution from other minerals and services, offsetting the impact of iron ore price correction.
* EBITDA stood at INR19.9b (+44% YoY and -20% QoQ), marginally below our estimate. EBITDA/t came in at INR1,872/t (+31% YoY and -13% QoQ) against our est. of INR1,998/t.
* APAT stood at INR17b (+40% YoY and -14% QoQ) against our estimate of INR16b.
* During 1HFY26, revenue/EBITDA grew 27%/20% YoY to INR131b/INR44.7b, primarily supported by volume growth and healthy realization. 1H adj. PAT increased by 15% YoY to INR36.7b.
* In 1HFY26, sales volume rose 12% YoY to 22.2mt and ASP increased by 13% YoY to INR5,920/t.
Valuation and view
* NMDC reported decent earning during 1HFY26, 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 FY26-27, driven by stable realization and healthy volume-led growth.
* NMDC has planned capex for various evacuation and capacity enhancement projects, aimed at improving the product mix and increasing production capacity to ~100mt by FY29-30.
* Additionally, NMDC had net cash of INR74b as of Sep’25, and is expected to generate strong OCF over FY26-28E. This will support its capex plan without overleveraging.
* At CMP, the stock trades at 4.9x EV/EBITDA and 1.7x on P/BV on FY27 estimate. We reiterate our BUY rating on NMDC with a TP of INR88 (based on 5.5x 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.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
