NMDC (NMDC IN) – Q2FY26 Result Update – Pricing headwinds ahead – Accumulate

NMDC reported a tad weaker than expected consolidated operating performance in Q2FY26 on lower realization. Volumes grew 10% YoY to 10.73mt in seasonally weak quarter while average realization declined 7.6% QoQ, due to price cuts undertaken for lump and fines during the beginning of the quarter and lower premium on a/c of product mix deterioration. Lower NSR coupled with higher purchase of finished products and elevated other expenses during monsoon led to EBITDA/t of Rs1,858 (PLe of Rs1,935). Receivables from RINL/NSL continue to remain elevated. NMDC took a price cut Oct’25 which would weigh on H2FY26 earnings though there is an expectation of better demand as steel consumption picks up post monsoon. We assume moderate increase in ore prices from Q4 as domestic demand improves in H2FY26, however with global ore supply expected to increase, NMDC’s ability of taking price hikes would be tested. On volume front, mgmt. aims to utilize maximum EC limits to deliver 55mt in FY26 which looks ambitious. Things to watch out for: 1) ramp up of volumes in H2FY26, 2) Planned EC additions and other capacities, 3) Karnataka bill status, and 4) ability to take price hikes. We tweak our estimates for FY26/27/28E by -3%/2%/-3% on lower pricing assumptions. We maintain 50/55/60mt volumes for FY26/27/28E and expect NMDC to deliver Revenue/EBITDA/PAT CAGR of 16%/16%/14% respectively. At CMP, the stock is trading at 4.5x/4.2x EV of FY27/28E EBITDA. Maintain ‘Accumulate’ with a revised TP of Rs86 (earlier Rs87) valuing it at multiple of 5x EV of Sep’27E EBITDA.