Motilal Oswal has maintained a 'Buy' rating on NMDC with a target price of Rs 98, supported by record quarterly production. However, investors may monitor margin pressures and significant contingent liabilities, such as the ongoing Karnataka Tax bill, which could impact the company's financial flexibility.
Brokerage firm Motilal Oswal has reiterated its 'Buy' rating for NMDC, setting a target price of Rs 98 per share. This target is based on a valuation multiple of 6.5 times the company's estimated EV/EBITDA (a metric used to value a company by comparing its total value to its operating profit) for the 2028 financial year. The brokerage's stance remains constructive on the state-owned iron ore producer, largely due to its strong market position and ambitious production expansion plans.
Q1 FY27 Performance and Margin Pressure
In the first quarter of the 2027 financial year, NMDC reported revenue of Rs 6,795 crore and a profit after tax of Rs 2,007 crore. While the company achieved a record iron ore production of 15.1 million tonnes—a 26% increase compared to the same period last year—financial results show some areas of concern. The company's EBITDA margin for the quarter was reported at approximately 41%, which fell short of the management's guidance of 42-43%. This margin compression was primarily driven by rising statutory levies, royalty payments, and overall input cost inflation.
Additionally, while production hit record highs, sales volume for the quarter stood at 11.8 million tonnes, marking a 23% decline sequentially. This discrepancy between production and sales has led to an inventory buildup, which increases the company's working capital requirements. Investors typically watch this gap closely as it indicates how quickly the company is able to move its mined ore into the market.
Risks and Contingent Liabilities
Beyond operational costs, investors should note the existence of significant contingent liabilities that could impact NMDC's balance sheet if they were to materialise. The most prominent of these is the Karnataka Tax bill, which involves a claim of approximately Rs 15,786 crore. Other outstanding issues, such as receivables from Rashtriya Ispat Nigam Limited (RINL) and remaining dues from Nagarnar Steel Limited (NSL), also remain ongoing monitoring points for shareholders.
Future Growth Monitorables
Looking ahead, the company is focused on a long-term goal to expand its capacity to 100 million tonnes per annum by the 2030 financial year. While this expansion plan is a core driver for the long-term outlook, the execution will require consistent capital spending and effective cost management. The key monitorables for investors in the coming quarters will be whether the company can improve its sales volume to clear inventory, successfully navigate the ongoing tax and receivable litigation, and manage the impact of rising statutory costs on its profit margins.