NMDC shares: Nuvama upgrades stock to 'Buy' despite Q1 EBITDA miss; check target price

Nuvama Institutional Equities has upgraded NMDC Ltd shares to 'Buy' from 'Hold', even as the company reported a marginally lower-than-expected EBITDA in the June quarter of FY27.

The domestic brokerage has, however, slightly lowered its 12-month target price for NMDC shares to Rs 97 from Rs 100.

NMDC reported EBITDA of Rs 2,470 crore for Q1 FY27, against Nuvama's estimate of Rs 2,620 crore. EBITDA was flat year-on-year (YoY), while EBITDA per tonne declined marginally by Rs 46/t YoY to Rs 2,106.

According to Nuvama, the performance was supported by a 2 per cent YoY increase in volumes and a Rs 416-per-tonne rise in blended realisation. However, these factors were partly offset by a Rs 652-per-tonne increase in royalty and premium costs.

Why Nuvama upgraded NMDC

Nuvama said domestic iron ore prices are likely to have bottomed, while higher volumes are expected to support earnings growth in the second half (H2) of FY27.

The brokerage is valuing NMDC at 9 times its FY28 estimated earnings per share (EPS). At the current market price, the stock trades at 7.6 times FY28E EPS, Nuvama said.

Receivables rise

NMDC's key receivables increased by Rs 130 crore quarter-on-quarter (QoQ) to Rs 9,560 crore.

Meanwhile, total outstanding dues from Rashtriya Ispat Nigam Ltd (RINL) and NMDC Steel declined by around Rs 117 crore QoQ to approximately Rs 11,160 crore. NMDC Steel's outstanding dues fell by Rs 240 crore to Rs 6,450 crore, while RINL's dues increased by Rs 126 crore to Rs 4,710 crore.

Nuvama said NMDC Steel turning profitable would help increase payments of outstanding receivables.

NMDC shares settled 0.85 per cent higher at Rs 85.10 on Monday. At this level, the stock has a potential upside of 13.98 per cent compared with Nuvama's target price of Rs 97.