- Revenue jumped 16% YoY to INR 76.1 bn, beating estimates, but EBITDA fell 10% YoY.
- Iron‑ore production surged 11% YoY to 14.7 mt, while sales grew only 6% YoY, hinting at inventory build‑up.
- ASP rose 9% YoY to INR 5,993/t, yet margin per tonne slipped 15% YoY.
- Stock trades at 5.3× EV/EBITDA and 1.8× P/BV – a valuation sweet spot or a trap?
- Buy rating with TP INR 100 based on 6.5× EV/EBITDA for FY27 – bullish case hinges on price‑to‑earnings multiple expansion.
You missed NMDC’s 16% revenue jump, and your portfolio is paying the price.
Why NMDC’s Revenue Growth Beats Estimates Yet Raises Questions
Motilal Oswal reported NMDC’s Q3 FY26 revenue of INR 76.1 bn, outpacing its own forecast of INR 71.1 bn. The 16% year‑over‑year lift was driven by higher volumes (up 11% YoY) and an improved net sale realization (NSR). However, the EBITDA line tells a different story: INR 21.4 bn, down 10% YoY, despite an 8% quarter‑over‑quarter improvement. The EBITDA per tonne fell to INR 1,688/t, a 15% YoY decline, indicating that each tonne of ore is generating less operating profit.
Investors must ask why top‑line strength isn’t translating into bottom‑line momentum. The answer lies in three converging forces: rising input costs, a modest ASP gain, and a steep increase in production that outpaces sales.
How the Iron‑Ore Sector’s Supply Dynamics Amplify NMDC’s Outlook
The global iron‑ore market is currently in a supply‑tight phase. China’s steel mills are stock‑piling, and geopolitical friction in Australia has nudged prices upward. NMDC benefited from this backdrop, as reflected in the 9% YoY ASP rise. Yet, the company’s own output jumped 44% QoQ, creating a temporary mismatch between production and sales. The 19% QoQ revenue rise masks the fact that inventory levels have likely swollen, pressuring future margins.
When supply outstrips demand, even a higher price may not offset the dilution of per‑tonne earnings. Analysts watch the inventory turnover ratio closely; a declining ratio often precedes margin compression.
Competitor Moves: Tata Steel, Adani Power and the Race for Ore
Tata Steel’s subsidiary, Tata Steel Mining, has announced a strategic partnership with a Brazilian miner to secure a diversified ore mix, reducing reliance on Indian domestic producers. Meanwhile, Adani Power’s recent acquisition of a captive coal block hints at vertical integration that could lower its raw‑material cost base, giving it pricing flexibility.
Both peers are positioning themselves to capture the price premium while NMDC wrestles with higher production costs. If Tata or Adani can source ore at lower logistics expense, NMDC may face pricing pressure, forcing it to either cut ASP or accept thinner margins.
Historical Parallel: NMDC’s 2018 Earnings Spike and Subsequent Correction
Back in FY18, NMDC posted a 20% revenue surge fueled by a government‑mandated increase in mining leases. The rally was short‑lived; by FY19, EBITDA margins fell 18% as the company grappled with inflated operating costs and a sudden dip in global ore prices. Share price, which had climbed to INR 140, retreated below INR 80 within twelve months.
The pattern repeats: rapid top‑line expansion followed by margin erosion. Investors who ignored the warning signs in 2018 suffered sizable losses. History suggests that without disciplined cost control, NMDC’s current growth could be a prelude to a similar correction.
Technical Corner: Decoding EV/EBITDA and P/BV Ratios
EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortisation) measures a firm’s total value against its cash‑generating ability. NMDC’s 5.3× EV/EBITDA is low relative to peers, implying potential undervaluation—provided earnings sustain.
P/BV (Price to Book Value) compares market price with the company’s net asset book. At 1.8×, NMDC sits below the sector average of ~2.5×, again suggesting a discount. However, both multiples are forward‑looking; they assume the FY27 earnings estimate is realistic. Any deviation will swing the multiples dramatically.
Investor Playbook: Bull vs Bear Cases for NMDC
Bull Case: If global ore prices stay above INR 6,000/t and NMDC trims inventory, EBITDA per tonne could rebound, validating the 6.5× EV/EBITDA target. A successful cost‑cutting program and strategic export deals would push the share toward the INR 100 target price.
Bear Case: Continued inventory buildup, rising logistics costs, or a global price correction could depress ASP and further erode margins. A failure to meet FY27 earnings forecasts would push the EV/EBITDA multiple lower, sending the stock toward INR 70‑80 levels.
Positioning now hinges on your risk appetite. Consider a phased entry: a modest initial stake with a stop‑loss near INR 78, and add on if Q4 results confirm margin recovery.