Brokerages bet on NMDC on robust volume growth expectations; Read for more details

Brokerage houses raised their target price on NMDC but kept the rating unchanged. The brokerage houses are betting on the robust volume growth of the company and the price hikes it took. Also, other steel plants have increased their production which will be aided by the government’s capital expenditure. Here are two top brokerages’ views on NMDC: 

Motilal Oswal

The brokerage house kept the rating unchanged to “Buy” with a revised target price of Rs 300. As it believes, the company’s volume growth will be robust. The ASP is expected to improve with two price hikes that the company took in Q1 of FY25. “We raise our EBITDA estimates by 9% and 7% for FY25 and FY26 to factor in a better realisation outlook,” said Motilal Oswal in a research report. “While the 4QFY24 performance saw some pressure on profitability, the outlook remained bright. NMDC has taken two price hikes in 1QFY25, which would improve its ASP and earnings.”

The company’s production is believed to rise in FY25 and FY26, providing it a strong growth comfort. However, the requisite approvals are still in place. 

Also, the steel demand will remain robust, backed by government initiatives for infrastructure, driving the overall demand for iron ore.

Prabhudas Lilladher

The brokerage firm has maintained its “Accumulate” rating on the stock but raised the price target to Rs 279 from Rs 253. It increased the estimates for operating profit by 6% for FY25 and 9% for FY26 on higher volume/price assumptions. The brokerage house sees a revenue growth of 17%, EBITDA growth of 25%, net profit growth of 23% over FY24-26.

Prabhudas tweaked its volume estimates to 47.5-53.1 mt from 48.1-52.4 mt on the back of a conflict with employees on wage revision. The brokerage firm also emphasised the benefit of taking price hikes in Q1 of FY25, which will help in future as domestic demand remains strong. “NMDC is well placed to capitalize on strong volume growth in domestic steel markets over the next few years given its increased focus on mining business, which is expected to deliver 9% CAGR over FY24-26E,” said Prabhudas Lilladher on NMDC in a research note. 

Further, the company has guided for 50 – 54 mt in FY25-26 after getting approvals for Kumaraswamy EC extensions.