Last Updated on Apr 28, 2022 by Aradhana Gotur
Domestic brokerage and research firm Edelweiss has maintained its buy recommendation on GMDC (Given that Gujarat Mineral Development Corporation Limited) with a revised target price of Rs 260 (earlier Rs 245).
Given that GMDC’s existing businesses – lignite and power – are stabilising, the management is now focused on new revenue streams.
GMDC is an Indian mining and mineral processing company that has given multibagger returns of over 167% in 2022 and about 243% in a year.
Earnings sneak peek
For Q4 FY 2022, GMDC reported an EBITDA of Rs 4.1 bn. (up 12.6x y-o-y), beat Edelweiss’ estimate.
The brokerage highlighted, “Key points: i) Blended realisation is up 92% YoY to ₹3,931/t. ii) Bhavnagar and Mata No Madh mines are key volume drivers. iii) One-time tax expense of ₹1.34 bn on account of the shift to a new tax regime. iv) Surplus cash of ₹7 bn deposited with GSFS”.
Edelweiss projects EBITDA to hover between Rs 12 bn. and Rs 13 bn. annually, thanks to higher lignite prices and a ramp-up in volume. The stock prices would also benefit from fructifying additional revenue streams, including bauxite, base metals, and fluorspar.
“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,” Edelweiss added.
Potential upside
All in all, the brokerage house believes that GMDC stock price has a potential upside owing to the following reasons:
- Global coal prices will remain robust in the medium term due to the ongoing Russia-Ukraine tensions
- The management expects the discount on substitutes to narrow down going ahead
- The other streams of revenue look promising
