NMDC Q1 Results Review - Ebitda Beat On Lower Royalty Payments; Q2 To Remain Soft: Systematix

Systematix Report

NMDC Ltd. reported Q1 FY25 Ebitda at Rs 23.4 billion (plus 17%/plus 11% YoY/QoQ), 33% above our estimate due to lower royalty charges during the quarter. Iron ore production and sales volumes for the quarter came in at 9.2 million tonne (-14% YoY/-31% QoQ) and 10.1 million tonne (-8% YoY, -19% QoQ), respectively. Realisations for Q1 FY25 averaged Rs 5,304/ tonne, registering a 9.4%/3.5% YoY/QoQ growth.

Ebitda margin for the quarter at 43.2% expanded by 626 basis points/1,083 basis points YoY/QoQ on account of lower royalties. Cost of production excl. selling expenses and royalties stood at Rs 942/tonne (+3.8%/-3.1% YoY/QoQ). Employee costs per ton increased to Rs 386 this quarter versus Rs 375/Rs 333 in Q4 FY24/Q1 FY24.

NMDC has consistently increased IO prices since September 2023, aggregating to around Rs 1,500/tonne for both lumps and fines, in line with the movement in international prices. Domestic IO demand outlook remains positive on steel production growth and incremental steel capacities to be added by primary producers over the next two-three years.

However, weak global macros signal a softer iron price scenario, further fueled by dwindling demand from China. The ensuing monsoon quarter is likely to witness weaker volumes and realisations following two price cuts taken by NMDC since June 2024.

Delays in securing EC enhancement and geopolitical factors causing a downward biased movement in IO prices are key risks for the company.

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