NMDC reported Q4 FY25 Ebitda of Rs 20.5 billion (-2%/-14% YoY/QoQ), 16% below our estimate due to lower realizations, higher employee benefits expenses, and selling expenses. Higher selling and other expenses can be attributed to higher pellet exports, whereas employee benefits surged during the quarter due to actuarial valuations.
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Systematix Report
NMDC Ltd. reported flat production and sales during the year, behind its guidance of 47- 49 million tonne. As volume numbers have picked up in April, management aspires to deliver 55 mt volumes this year, aligning 100% with its EC limit.
We factor in 48mt/51.8mt volume sales in FY26/FY27 (versus 50.7 mt/52.2 mt earlier) while keeping realisations at the same level as FY25. The company has commenced pellet exports, which have notably contributed to the topline in Q4.
With Fe content of ~66-67%, NMDC expects to earn $30-40/t premium to global iron ore prices on its pellet export realisations. We factor in 2mt and 2.5mt pellet sales in FY26/FY27 versus management guidance of achieving 2.5-3mt pellet sales in FY26 itself.
We revise our FY26/FY27 Ebitda estimates higher by 18%/24% on higher realisation assumptions and additional contribution from pellet export sales.
We value NMDC at 5.7x FY27E EV/Ebitda with a revised target price of Rs 78/share, implying an upside of 9% from CMP. The company is progressing towards its 100mt capacity target with a revised estimated outlay of Rs 720 bn versus Rs 500 bn earlier.
NMDC spent Rs 34 bn in capex this year and expects over Rs 100 bn in capex spending for the next two years. Maintain Hold.
Risks and re-rating levers:
Weak global iron ore pricing is a key risk.
Demonstration of superior volume growth can drive stock rerating.
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