NMDC shares last traded at 4.5 times FY26 estimated EV/Ebitda and 1.7 times FY26 estimated book value. The stock delivered 83 per cent return in the past one year against 95 per cent return by the BSE PSU index during the same period.

Shares of the largest domestic iron ore miner NMDC Ltd have seen a 20 per cent correction since February high, thanks to ease in the iron ore prices globally, which are seen weighing on the PSU’s near-term growth prospects. This has led the PSU stock cut its one-year period return to 83 per cent. This is a 95 per cent return posted by the BSE PSU index during the same period. Domestic brokerage Motilal Oswal Securities said NMDC is looking to continuously improve volumes to offset the impact of fall in iron ore prices. For now, it has retained its ‘Buy’ rating on the stock, with a target price of Rs 260, which suggests a 29 per cent potential upside.

NMDC shares last traded at 4.5 times FY26E EV/Ebitda and 1.7 times FY26E price to book value.

The domestic demand for iron ore is expected to move in tandem with infrastructure and construction growth. NMDC, being the largest domestic iron ore miner, is expected to produce 45 mt of iron ore in FY24 (production for 11MFY24 has crossed 40.2 mt), surpassing production of over 40 mt for the third year in a row. It is well on track to exceed 50 mt of production in FY25E and 55 mt in FY26E,” said Motilal Oswal Securities.

Motilal Oswal said the domestic steel sector is well-placed compared with its global peers; and the domestic crude steel capacity is expected to reach 175 mt in FY24 with 82 per cent capacity utilisation.

This would translate to 282 mt of iron ore requirement in FY24E, with NMDC commanding a 16 per cent market share.

“Similarly, as crude steel capacity inches up to 300 mt by FY30-31, total demand for iron ore would be $435-445 mt. We believe NMDC, with a dominant presence in the domestic market, is well placed to capitalise on the growth opportunities ahead,” Motilal Oswal said.

It felt that robust capex would support volume momentum. NMDC is undertaking multiple capex projects across two verticals, i.e. dispatch and sales, which are expected to augment ore production, improve the product mix and enhance mining capacities. NMDC, said Motilal Oswal, is enhancing its capacity by setting up a 12 mt SP-III (screening plant) at Kirandul, along with downhill conveyor and 2mt screening line at Bacheli.

“The 15 mt slurry pipeline from Bailadila to Nagarnar is progressing well with almost all approvals received. Similarly, the 6mt beneficiation plant is expected to come on stream by the end of FY25. These capex plans, along with its presence in international geographies, will enhance its total capacity to 100 mt.NMDC has earmarked a capex of Rs 1750-1800 crore for FY24 and Rs 2,000-2,100 crore for FY25,” it said.

Among key risks, Motilal Oswal said a total of 105 iron ore blocks have been auctioned since FY16, out of which 30 mines are operational. “When the remaining captive mines become operational, it would lead to an increase in the supply of iron ore, thus increasing the competition for NMDC,” it said. Also, NMDC relies heavily on a few customers, which exposes the company to business risk, the brokerage said.