Buy Gujarat Mineral; target of Rs 219: Firstcall Research

Firstcall Research is bullish on Gujarat Mineral Development Corporation (GMDC) and has recommended buy rating on the stock with a target of Rs 219 in its August 3, 2012 research report.

“Gujarat Mineral Development Corporation (GDMC) was incorporated in 1963 and is engaged in business of mining and mineral processing. The company was set up to produce major mineral resources in the state of Gujarat. GDMC started its operations with a small sand crushing facility located at Surendranagar that delivered sand to consumers in the state. Sand is majorly used by sodium silicate and glass manufacturers. The company entered its next venture of beneficiation of fluorspar in the year 1968. Fluorspar is rare mineral and has applications in industries like steel, aluminium, hydrochloric acid, foundry flux and welding electrodes. In 1970, the company commissioned mining of lignite in the Kutch district. Lignite is a cheaper substitute for coal. Later 1984, GDMC started its mining operations at Rajpardi near Ankleshwar in order to supply lignite to textile industries. GMDC is the largest merchant seller of lignite in the country. GMDC has brought technology known as TAKRAF of Germany for its exploration activities.”

“Gujarat Mineral Development Corporation (GDMC) was incorporated in 1963 and is engaged in business of mining and mineral processing. The company was set up to produce major mineral resources in the state of Gujarat in India, reported its financial results for the quarter ended 30 June, 2012. The forth quarter witness a healthy increase in overall sales as well as profitability on account, an enhanced Dealers network and robust infrastructural Support system. The company’s net profit jumps to Rs.1705.18 million against Rs.1531.10 million in the corresponding quarter ending of previous year, an increase of 11.37%. Revenue for the quarter rose 6.30% to Rs.4965.30 million from Rs.4670.92 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.5.36 a share during the quarter, registering 11.37% increase over previous year period. Profit before interest, depreciation and tax is Rs.2881.80 millions as against Rs.2614.54 millions in the corresponding period of the previous year.”

“At the current market price of Rs.194.00, the stock P/E ratio is at 10.49 x FY13E and 9.28 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.18.50 and Rs.20.90 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 21% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 6.26 x for FY13E and 5.62 x for FY14E. Price to Book Value of the stock is expected to be at 2.34 x and 1.87 x respectively for FY13E and FY14E.”

“Gujarat Mineral Development Corporation Ltd has entered into a Joint Venture Agreement with Gujarat Fluorochemicals Ltd and Navin Florine International Ltd for fluorspar beneficiation project. The Joint Venture will be in the form of a separate company in which GMDC will own 50% equity. The first quarter witness a healthy increase in overall sales as well as profitability on account of powerful combination of company’s products. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 219 for medium to long term investment,” says Firstcall Research report.  

Public holding more than 90% in Indian cos

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