NMDC Q3 Review — Margin Expansion Despite Ebitda Miss On Higher Royalty Expense; Systematix Retains 'Hold'

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Systematix Research Report

NMDC Ltd. reported Q3 FY25 Ebitda of Rs 23.7 billion (+18%/+71% YoY/QoQ), 14% below our estimate due to higher royalty payments during the quarter, in line with higher production. Iron ore production and sales volumes for the quarter came in at 13.3 mt (+8.7% YoY, +60.5% QoQ) and 11.9 mt (+4.8% YoY, +22.6% QoQ), respectively.

Realisations for Q3 FY25 averaged Rs 5,501/tonne (+15.9%/+8.9% YoY/QoQ), 1% below our estimate of Rs 5,550/t. Ebitda margin for the quarter was 36.1% versus 37.1%/28.2% in Q3 FY24/Q2 FY25. Cost of production exclusive selling expenses and royalty stood at Rs 864/t (+1.0%/-48.6% YoY/QoQ).

Employee costs per ton decreased to Rs 368 this quarter versus Rs 430 in Q2 FY25. NMDC implemented a price cut in January, declining lump and fines prices by 6% each to Rs 6,000/ Rs 5,060 per ton vs Rs 6,350/Rs 5,750 per ton in October 2024, respectively.

The company is looking at strong volume recovery in 4Q and is confident of securing EC limit enhancements this month and next. NMDC has also outlined a Rs 700 billion capex plan to reach the 100mt volume target by 2030; finer details of the plan remain to be shared.

We maintain Hold rating on the stock based on 6x FY27E EV/Ebitda. Delays in securing EC enhancement and geopolitical factors causing a downward biased movement in iron ore prices are key risks for the company.

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