NMDC: Increasing EC Limit To Drive Volumes; Capex Underway To Support Higher Volumes: Motilal Oswal

Motilal Oswal Report

India’s crude steel capacity is expected to reach 300 million tonne by FY30-31, which will increase the iron ore requirement to ~435-445 mt. As NMDC Ltd. 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.

At CMP, NMDC trades at 4.2 times EV/Ebitda on FY27E. We reiterate our Buy rating on NMDC with a target price of Rs 280 (based on 6x Sep’27E EV/EBITDA).

Key risks:

1. Increasing competition for NMDC - since FY16, +100 iron ore blocks have been auctioned, and when these mines become operational, it would lead to higher supply;

2. NMDC relies heavily on a few customers, which exposes it to business risk.

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