The brokerage house Nuvama retained a Buy rating on NMDC. It sees a potential of up to 16% with a target price of Rs 85 on NMDC. The steel company’s trade receivables are increasing and are expected to fall in the upcoming quarters, said Nuvama.
Nuvama on NMDC: Increased trade receivables expected to fall
The company’s outstanding dues surged Rs 1,140 crore sequentially to Rs 7,840 crore due to a jump in dues from NMDC Steel and RINL for iron ore supplies. “We expected it to fall with GoI’s (Govt. of India) support to revive RINL and NMDC Steel’s collaboration with SAIL,” said Nuvama. However, the company’s management is confident of the liquidation of receivables from the NMDC Steel plant in each of the subsequent quarters and a return to normalcy by the end of FY26.
Nuvama on NMDC: Cost of production
On the operating front, NMDC’s EBITDA fell 4% YoY due to lower realisation and higher cost of production per tonne. Its revenue rose 7% YoY to Rs 6,950 crore primarily due to higher pellet and other metal sales.
Iron ore revenue fell 1.2% YoY to Rs 6,350 crore due to lower realisation, partially offset by a marginal uptick in sales volume, said Nuvama in a research report. In the fourth quarter of FY25, the company’s royalty & premium contributed 42% to revenue versus 47% in Q4FY24. Lower royalty and premium cost by Rs 158 per tonne, offset by higher other cost, led to the overall CoP/t to rise to Rs 3,872/tonne. Also, NMDC is yet to make any meaningful profits from job work on pellets from KIOCL, according to NMDC.
All in all, the steel company’s receivables is a concern as it is depleting cash, but it is expected that the receivables will fall over the upcoming quarters. Nuvama maintained FY26 and FY27 EBITDA.
NMDC stock performance
The share price of NMDC has risen 0.77% in the past five trading sessions. The stock has given a return of 10% in the past one month. However, the stock price has increased by 6% in the last six months. NMDC’s share price has erased over 16% in the previous one year.