Can FY25 break NMDC’s momentum?
₹1,781, thanks to increased volume and higher realization, with a favourable product mix contributing to this rise. The company is poised for a strong final quarter, bolstered by a price increase of ₹600-650 per tonne in January, which would boost realization further. Moreover, NMDC is confident of achieving a production volume of 46-47 million tonnes in FY24, marking a 13% year-on-year increase in Q4 to meet the lower end of its guided range.
However, questions loom about the company's prospects beyond Q4. While NMDC anticipates a roughly 20% volume increase in FY24 on a lower base, growth is expected to slow down in FY25, with projected volumes of 50-51 million tonnes, marking about a 9% increase. The potential for further price hikes also seems uncertain.
“We see iron ore prices peaking out and expect a fall in iron ore prices in FY25," said analysts at Nuvama Research in a report on 15 February. The broking firm has factored in a price drop of ₹750-900 per tonne in FY25, compared to Q4FY24 average. Adding to the challenges, international iron ore prices are showing signs of weakness.
For instance, the average price of China iron ore fines in February so far is about $129 per tonne, down 5% versus December average, according to BigMint (formerly SteelMint). Moreover, the demand conditions for steel are not so encouraging. Iron ore is a key raw material used in steel production.
The average price of domestic hot-rolled coil in February is down by 6% compared to the 2023 average. “Increasing captive iron ore by integrated steel companies remains a structural headwind for NMDC," said a report by Kotak Institutional Equities on 14 February. With investors sitting on handsome gains, a key dampener would be NMDC not being
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