Lower prices, volumes to mar NMDC’s near-term prospects

livemint.com:

MUMBAI : NMDC Ltd clocked an Ebitda growth of 18% year-on-year (y-o-y) for the June quarter (Q1FY25), beating Street’s estimates. This growth was driven by higher realisation, up 9.3%, lower royalty expenses and other operating costs. However, the company faces near-term headwinds, with the recent cut in prices reflecting global supply overhang.

The management has guided for its average realization to drop to ₹4,300 per tonne in the September quarter (Q2FY25) from ₹5,300 per tonne in Q1FY25. Ebitda is earnings before interest, tax, depreciation and amortization. Factoring the change in market conditions, most brokerages have lowered their earnings estimates for NMDC.

“We are cutting FY25 and FY26 estimated Ebitda by 9% and 5% to factor in lower prices and volume," said Nuvama Institutional Equities’ analysts in a 16 August report. Similarly, Philip Capital India Research points out: “Given international prices below $100 per tonne, we believe that NMDC may face one last round of price correction in late August to early September, further impacting the performance." Philip Capital has reduced FY26 Ebitda estimates by 6%. The mining industry is also assessing the financial liability arising from the recent Supreme Court ruling upholding state governments' right to levy taxes on ores mined within their respective states.

The court’s decision is retrospective, applicable from 2005, which means miners would have to pay past taxes also in cases where states had raised the demand. However, states have the right to waive past dues. According to NMDC management, the immediate liability arising out of the decision is only ₹21 crore.