Brokerage Nuvama has upgraded NMDC to 'Buy' from 'Hold', citing expectations of a recovery in domestic iron ore prices and stronger sales volumes in the second half of fiscal 2027. The brokerage has lowered its target price to ₹97 from ₹100, valuing the stock at 9x FY28E earnings. However, Citi has retained its 'Sell' rating but cut its target price to ₹80 from ₹85, while Goldman Sachs also maintained its 'Sell' rating with a target price of ₹84. At the current market price, NMDC shares fell as much as 4.1% to ₹81.05 before recovering slightly, trading around ₹81.24, down 3.74% in morning trade. The stock has a 52-week high of ₹97.49 and a 52-week low of ₹68.19, with shares having fallen about 14% from their 52-week high on 3 June, reflecting the earnings pressure.
NMDC reported consolidated net profit of ₹2,006 crore, representing a 1.9% year-on-year increase from ₹1,967 crore in the same quarter last year. Total income increased 0.8% to ₹6,795 crore compared to ₹6,739 crore in Q1 FY26. Revenue from iron ore sales stood at ₹6,802.12 crore, around 9.7% higher than ₹6,199.15 crore recorded in April-June FY26. Ebitda declined 0.4% to ₹2,468 crore from ₹2,478 crore in the previous year, with EBITDA margin contracting to 36.32% from 36.77%. The performance was supported by a 2% year-on-year increase in sales volumes and a ₹416 per tonne improvement in blended realisation. However, NMDC reported EBITDA of ₹2,470 crore for Q1 FY27, against Nuvama's estimate of ₹2,620 crore, with EBITDA remaining flat year-on-year while EBITDA per tonne declined marginally by ₹46 per tonne to ₹2,106. Citi noted that EBITDA margin improved sequentially to 36% from 24% in the March quarter, attributed to the absence of steel trading and stronger prices, though it remained below 37% in Q1 FY26.
The divergence between production and sales continues to challenge NMDC's performance, with sales volumes rising only 1.8% to 11.7 million tonnes in Q1 FY27 despite strong production growth of 26% year-on-year to 15.2 million tonnes. This production-sales gap is expected to persist in the monsoon-driven seasonally weak Q2. The company has implemented price cuts on 10 July and again on 8 August, with the two reductions amounting to over 7%, bringing prices below the Q2 FY26 average. Despite the price cuts, sales declined 1.7% year-on-year in July, prompting the additional price reductions. ICICI Securities noted that iron ore prices are likely to remain under pressure in the near term due to higher domestic ore availability, lower international prices and slower steel capacity additions. NMDC's Q1 revenue rose barely 2% year-on-year to ₹6,795 crore, with the 50% drop in the 'pellets and other minerals' segment offsetting realization growth and higher volumes.
To reduce vulnerability to iron ore price fluctuations, NMDC is focusing on increasing output of value-added products such as pellets that fetch a higher EBITDA margin of 42-43% versus the aggregate EBITDA margin of 29% for FY26. Pellet production is targeted at 3 million to 3.3 million tonnes in FY27, from 2.4 million tonnes in FY26. The company's diversification into coal mining should start generating revenue as the Tokisud Jharkhand mine is expected to be commissioned in Q2. Jharkhand's Rohne coking coal block is expected to start overburden removal in Q3, followed by coal production in FY28, with NMDC targeting 2 million tonnes of production from the mine in FY28 against a peak-rated capacity of 8 million tonnes per annum. The company expects its coal business to contribute about ₹5,000 crore in revenue over the next three years.
The brokerage expects sales volumes to accelerate in second half of this fiscal as demand improves, providing a key earnings growth driver for NMDC. However, Citi expects domestic iron ore prices to remain rangebound to lower, citing a weaker global price outlook, NMDC's focus on volumes and rising competitive capacity. Goldman Sachs predicts weak upcoming Q2 earnings for FY27 due to recent price cuts and seasonal weakness impacting near-term performance. The Mines and Minerals (Development and Regulation) Amendment Bill, 2026, passed by parliament earlier this month, should remove the overhang of the Karnataka (Minerals Rights and Mineral Bearing Land) Tax Bill passed by the state assembly in December 2024. The Karnataka bill had imposed additional levies on NMDC, prompting the company to declare a contingent liability of ₹15,800 crore, which gets overruled by the central bill. NMDC is trading at around 6.5 times its September 2027 estimated EV/EBITDA, compared with its 10-year average of about 5.5 times and a global peer range of 4-6 times.
