Target: ₹180


We upgrade NMDC to Buy from Add as sales volume in FY24 may breach the 32-40 mt range; long-term volume visibility is clearer as the roadmap for 100 mtpa by FY30, though aspirational, is being worked on; commercial mining in Odisha is progressively getting undermined, resulting in more opportunity; and RoE may improve further from the current level of 22 per cent as mining business takes the centre stage and steel plant is demerged.

Taking cognisance of the sales volume until Aug’23 and favourable price outlook, we raise our FY24/FY25 EBITDA by 22/38 per cent respectively. (FY24). During Q1-FY24 earnings call, management had guided for FY24 volume at 47-50 mt, contingent on enhanced EC limit coming to force in Donimalai mine in Karnataka from Oct’23.

Furthermore, we raise EV/EBITDA multiple to 5.5x (earlier 5x) in view of robust volume trajectory in future. Our revised TP works out to ₹180 (earlier ₹130).

Lower than expected sales volumes and sharp correction in iron ore prices are the key downside risks to our call. The recent imposition of export duty doesn’t augur well for NMDC. On the other hand, extensive covid easing in China followed by stimulus measures and removal of export duty on pellets are the key upside risks