28 Apr , 2022 By : Kanchan Joshi
Domestic brokerage and research firm Edelweiss sees Gujarat Mineral Development Corporation Limited (GMDC_ at an interesting juncture as its existing businesses – lignite and power – are stabilising. Now management is focused on new revenue streams to exploit the company’s latent potential.
The brokerage has maintained its ‘BUY’ rating on GMDC shares with a revised target price of Rs260 (earlier Rs245). The multibagger stock has rallied over 167% in 2022 (year-to-date) so far, whereas, the metal stock has skyrocketed about 243% in a year. GMDC is a mining and mineral processing company in India.
“GMDC’s Q4FY22 EBITDA of Rs4.1 bn (up 12.6x YoY) beat our estimate. Key points: i) Blended realisation is up 92% YoY to Rs3,931/t. ii) Bhavnagar and Mata No Madh mines are key volume drivers. iii) One-time tax expense of Rs1.34 bn on account of the shift to a new tax regime. iv) Surplus cash of Rs7 bn deposited with GSFS," the brokerage note highlighted.
Going ahead, Edelweiss expects EBITDA to sustain within Rs12–13 bn annually owing to structurally higher lignite prices and volume ramp-up. Besides, its believes fructification of additional revenue streams such as base metals, bauxite and fluorspar would be the key stock drivers.
“We are surprised by the series of price hikes taken by the management since August 2021, taking advantage of the higher price of substitutes. Furthermore, the volume ramp up is also evident. Besides, the company has appointed consultants to look at opportunities beyond lignite," it added.
Owing to the ongoing Russia-Ukraine tensions, the brokerage expects global coal prices to remain robust in the medium term. Besides, the management has indicated that the discount with respect to substitutes is expected to be narrower going ahead. Edelweiss believes that the other streams of revenue are also promising and a clearer path will be revealed in due course.
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