Buy GMDC; target of Rs 213: Angel Broking

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Angel Broking is bullish on Gujarat Mineral Development Corporation (GMDC) and has recommended buy rating on the stock with a target of Rs 213 in its April 08, 2013 research report.
 
“Gujarat Mineral Development Corporation (GMDC) is the largest merchant miner of lignite in India, supplying lignite to industrial units, including textiles, chemicals, ceramics, bricks, and captive power plants. Currently, it operates 5 lignite mines in Gujarat. Apart from lignite, it also produces bauxite, fluorspar, and manganese ore and operates a 250MW lignite-based power plant. The company also operates 150MW wind power plants.”
 
“GMDC has increased its lignite volumes at a CAGR of 7.5 percent over FY2003-12, much higher compared to its peers. Although its volumes declined by 3.5 percent yoy in FY2013, GMDC is expanding its capacity via brownfield expansion at Mata-no-Madh and Bhavnagar mines, which are expected to add production capacities by 1mn tonne and 2.0mn tonne, respectively, during FY2014. Further, GMDC has cleared major regulatory hurdles for its upcoming Umarsar mine (production capacity -1mn tonne), which is expected to start production in the coming few months. GMDC has exhibited strong pricing power (realizations have grown at a 9.9 percent CAGR over FY2006-12) due to the prevalence of a robust demand scenario in the pro-industry state of Gujarat. For consumer industries in the state, purchasing coal from Coal India (CIL), or importing coal, stands to be expensive compared to purchasing lignite from GMDC. GMDC intends to raise prices by Rs100-150/tonne in 1QFY2014. We compare GMDC with CIL on various operational parameters. Over the last 7-10 years, GMDC has been beating CIL in terms of achieving volume growth and taking price hikes. Moreover, unlike CIL, GMDC does not have an overhang of having to incur high staff costs.”
 
“GMDC beats CIL in terms of efficiency, volume growth and ability to take price hikes. Despite these factors, GMDC is currently trading at an EV/EBITDA multiple of 3.3x FY2015E, compared to CIL, which is trading at a multiple of 4.4x, which is unwarranted in our view. GMDC ticks most boxes for a long-term view: A virtual monopoly with proven ability to increase sales volume and prices available at an inexpensive valuation. The key catalysts for the stock are likely to be: 1) lignite price hikes, 2) regulatory approvals for brownfield expansions, and 3) commencement of production from Umarsar mines. We value GMDC at an EV/EBITDA of 4.5x FY2015E with a target price of Rs213 and initiate coverage with a Buy rating,” says Angel Broking research report.

Read More