GMDC Ltd- Company update- Worst over, smart production uptick ahead, maintain Buy: centrum

Rating: Buy; Target Price: Rs150; CMP: Rs102; Upside:47.3%



Worst over, smart production uptick ahead, maintain Buy



We maintain Buy on GMDC with an increased TP of Rs150. Our recent
visit to the company’s Bhavnagar mine and interaction with management
cemented our view of sharp volume recovery ahead and worst being past.
Current undemanding valuations probably indicate investors’ extreme
scepticism on a near-term volume recovery/price hikes. The dismal
production for YTDFY14 was largely due to heavy monsoons, while
production issues (hard strata, thin seam) have already been tackled.
The land acquisition for overburden dumping that is still pending is
likely to be resolved in the near future, offering additional volume
upside. We have increased our volume estimates for FY14E/15E and
adjusted realizations & costs leading to upward revision in EBITDA
estimates by 2.1%/10.3%.

GMDC Ltd Volume growth to come back :: Sunidhi

Multiple disappointments have led the GMDC share price to free fall, we believe
pessimism is overdone and expect some rationality to return once volume shows sign
of stability. We believe volume could regain normalcy at its Tadkeshwar mine as seam
thickness is getting closer to 7m. We believe Tadkeshwar could scale back to 0.6-0.7
mn tonnes run rate from Q3FY14 onwards making total volumes at c.2mn tonnes. We
expect complete normalcy by FY15 to 2.2 mn tonnes. Secondly Volumes at Bhavnagar
mines are continuously getting affected due to teething problems of overburden
dumping. We believe the problem is more genuine and serious as it relates to land
acquisition for overburden dumping of capacity addition which company expected to
increase to 5mtpa. However previous estimates across the street were at 3-3.5MTPA
from Bhavnagar mine, which are now getting rationalized. But we believe company
would be able to maintain 2mtpa volume in FY14.
What is share price factoring? We believe multiple factors led the de-rating
GMDC share price has been witnessing severe pressure since Q3FY13. We underpin
following reasons for such a downfall i) Volume de-growth ii) delay in Lignite price hike
ii) Thermal power sub-performance iv) allocation of cash flows towards low return
wind generation business. However of these reasons cited, we believe weight age to
the volume and price hold the substantial value. We also believe that these factors
are time bound and have the potential to recover going ahead. We continue to believe
the robustness of demand of lignite in Gujarat and monopolistic nature of GMDC. We
also continue to believe that GMDC has the pricing power and would be utilized in
course of time. We never took such price hike in our estimates for FY14, understanding
bureaucratic nature of operations. However at CMP of 78 stock seems to factor in
volume similar to FY10 and a multiple of 4x EV/EBIDTA, which we believe is a perfect
case of irrational exuberance.
Umarsar mine ready with wildlife clearance, State level permissions pending, Make
us believe volume growth underway
GMDC secured wid life clereance of Umarsar mine two months back and has been
waiting for various state level miniscule permissions before it can issue tender for
contract mininng. However drilling work is getting delayed, which was expected to
start by now. Considering cautious scenario we now remove 0.5mn tonne from our
FY14 estimates, however there exist a bright possibility of Umarsar contributing in
FY14. We also cut our estimate from other mines given weak june volumes. We Now
cut our volume assumptiions to 11.6mtpa from 12.2mtpa.
Valuation and Recommendation
We now factor in volume estimate of 11.6 mn tonnes for FY14 against 12.2mn tonnes
earlier due to 0.5 mnt lower volume at Umarsar and other mines due to early monsoon
adjustment. We continue to believe in company’s overall strength and believe these
issues can be overcome in near future given strong execution done in the past. We
value GMDC at 5x of its FY14E EBIDTA and maintain our BUY recommendation with
target price of `153.

GMDC - Q1FY14 Result Update - Centrum

Lignite production issues continue
GMDC lignite production issues kept volumes subdued at ~2.43MT (down by
~28% YoY) and resulted in a sharp drop in revenues/EBITDA by ~26%/36%
YoY. EBITDA at Rs1.7bn was marginally lower (vs. est. Rs1.76bn) and margin
stood at 46.3%, lower by 430bps QoQ due to lower lignite volumes and
mining revenue. We have cut our volume and realization estimates for
FY14E/15E due to production issues at Tadkeshwar and Bhavnagar mines
and delay in merchant price hike. We cut our valuation multiple to 4x FY15E
EV/EBITDA and reduce the target price to Rs138. Maintain Buy.
Lignite volumes remain dismal and fall by ~28% YoY: Lignite volumes stood
at 2.43 MT, down by ~28% YoY. The volume trajectory was down across all the
mines but sharp drop was again seen mainly from Bhavnagar and Tadkeshwar
(both down 41% YoY) on account of issues related to production at mining sites
and scarcity of land for dumping overburden. Bauxite volumes were dismal at
60kt, down from 200kt YoY.
Negative EBIT from power operations reduces due to higher wind power
generation: The thermal power plant operated at ~22% PLF (as 1 unit of 125MW
was shut for overhauling) and generated only 122mn units whereas wind power
PLF was high at ~30% resulting in ~80mn units. EBIT loss from power division
reduced to ~Rs2mn due to higher wind power generation. Thermal power
operations at Akrimota saw low PLF again due to the transfer of operations to
KEPCO and shutdowns for overhauling.
EBITDA margin drops further: EBITDA margin stood at 46.3%, lower by 430bps
QoQ due to sharp drop in profitability from both mining and power businesses.

GMDC - Management Meeting Update - Centrum

Management Meeting Update/Estimate Change

GMDC

Rating: Buy

Target Price: Rs182

CMP: Rs133

Upside: 36.7%

Grappling with production issues

We met with GMDC management to gauge reasons for the sharp underperformance in volumes since Q3FY13 and other production issues. We held lengthy discussions with Mr. A.L Thakor, Mr. Pawan Bhootra and Mr. D. Chattopadhyay on the steps taken by GMDC to overcome production issues and improve performance of lignite and power divisions going ahead. We inferred that production issues were mainly at Tadkeshwar and Bhavnagar mines due to the scarcity of land for overburden dumping, increased thickness of stone (at Bhavnagar) and reduced thickness of lignite seam (at Tadkeshwar). While the company has taken various steps to mitigate these issues, progress remains slow and volume growth is expected to be subdued in FY14E. Demand however remains strong for lignite in Gujarat and price hikes (expected to be more than earlier proposed Rs100/t post coal price hike of ~10% by Coal India in May’13) could be taken soon (post board meeting in July’13).  Power division is being overhauled (after handover to KEPCO) and should stabilise from Aug’13. We have cut our volume estimates for FY14E/15E due to production issues and reduced earnings estimates. We cut our target price to Rs182. Maintain Buy on attractive valuations post recent underperformance and higher quantum of price hikes ahead.

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Gujarat Mineral Development Corpn (Rs 143.9): Buy :: Business Line

GMDC- Monopoly At Attractive Valuation:: Nirmal Bang

Monopoly At Attractive Valuation
We have assigned a Buy rating to Gujarat Mineral Development Corporation
(GMDC) due to monopolistic nature of its business, steady volume and earnings
growth and attractive valuation. We expect GMDC to post 18%/22%/21% CAGRs
in revenue/EBITDA/PAT, respectively, over FY12-FY15E, driven by 11%/9% rise in
lignite volume/realisation, respectively, in the same period. GMDC trades at P/E
of 9.0x/8.4x/7.3x FY13E/FY14E/FY15E earnings, respectively, while EV/EVITDA
multiples are at 4.8x/4.3x/3.5x, respectively, for the same period. We have set a
target price of Rs265 (6.0x FY14E EV/EBITDA) on GMDC, up 34% from the CMP

GMDC - Management Interaction Takeaways - Centrum

Management Interaction Takeaways

GMDC

We recently interacted with the management of GMDC and following are the key takeaways from the same:-
Lignite Volumes & Price Hikes
m  The management has reiterated that volumes would remain strong on the back of robust demand and FY13E volumes should be anywhere between 12.7-13.0 MT, up by 12-14% YoY.

G M D C:: Diwali Picks - November 2012 ::Anand Rathi Top 7 - Diwali Picks

Company Introduction: GMDC was established by the Government of Gujarat, in the year 1963, for developing important and major mineral resources of the State. Its product range includes energy minerals like Lignite, Bauxite, Fluorspar, Granite and Marble.
Investment Arguments The nearest coal mine is almost 700 Kms away from Gujarat Border makes it bit difficult for companies to transport coal from mines. Transportation cost is again major chunk in total cost of coal which is on upward move (Container corp. recently hike the freight cost by 20-25%). Imported coal is again costly because of rupees depreciation and difficult to accommodate in domestic boilers. Overall cost benefits analysis forced companies to buy the coal from GMDC.
Expected Value: 264 Sector: Power & Mining
GMDC is continuously decreasing its dependency on lignite and putting effort to de-risk the business by entering into Bauxite, power; both thermal & Wind alongwith Manganese, Coal, Cement, Lead, Zinc, Copper production. Total Demand for Lignite in India is expected to grow at a CAGR 10% from 55.8 mn tonnes in 2011-12 to 87.8 mn tonnes in 2015-17. Power sector is major driver of growth. Company has thermal power plant of 250 MW which is running below its optimal capacity, GMDC has outsourced Korean company to enhance the PLF. We expect thermal power will start contribution in EBIDTA from FY 14 onwards.
Valuation In PE term stock is quoting at 8.5x FY15E EPS of Rs 24.7 and 9.5x FY14E EPS of Rs 22.1. We see the price target of Rs. 264 based on FY 15, EPS. (Value based on 5 years median PE multiple.)

GMDC - Q2FY13 Result Update - Centrum

Q2FY13 Result Update

GMDC

Buy

Target Price: Rs244

CMP: Rs206

Upside: 18.3%

Strong operational performance, maintain buy

GMDC reported better than expected EBITDA margin of 56.9% (higher by 1390bps YoY) as lignite volumes improved by ~20% YoY to 1.96 MT. Net sales grew by 56.6% YoY and EBITDA by 107% YoY as costs were lower on operational improvements. Power division reported higher EBIT as the lignite power plant reported positive EBIT of Rs20mn. We see hikes in merchant pricing ahead due to favourable demand supply situation in Gujarat market and also higher landed cost of Coal India’s similar calorific value coal. We maintain our volume estimates and marginally revise our power plant PLF estimates. Reiterate buy with an upward revised target price of Rs244.

Management Interaction Update/Estimates Revision GMDC Buy Target Price: Rs236 :Centrum

Management Interaction Update/Estimates Revision

GMDC

Buy

Target Price: Rs236

CMP: Rs190

Upside: 24%

Pricing and volumes to stay robust, reiterate buy

We interacted with the management of GMDC to get better clarity on recent developments. We remain positive on the stock on account of i) recent approval of pending price increase in regulated Panandharo mine, ii) strong possibility of price increase in merchant mines in H2FY13E (our exp: 4% hike), iii) strong volume growth of 12%/10.2% in FY13E/14E, iv) turnaround in power plant operations and its consequent outsourcing and v) successful implementation of lignite beneficiation project in FY14E. Factoring in higher prices, we revise our EBITDA estimates for FY13E/14E upwards by 6.6%/6%. We believe valuations are at an unwarranted discount to coal peers. Maintain buy with a target price of Rs236.

m  Price increase at Panandharo approved, hikes in merchant prices expected in H2FY13E: Management has guided for price increase in merchant mines soon after monsoons. We expect price hike of ~4% for merchant mines of GMDC in H2FY13E and have factored in overall merchant price increase of 2%/4% for FY13E/14E. GMDC also recently obtained the pending approval for increase in price (from Rs532/tonne to Rs635/tonne applicable from FY12 onwards with a 4% YoY increase hereafter) at its regulated mine (Panandharo) and also received Rs300mn payment from SEBs. As a result, we expect lignite blended realizations to increase by 8.9%/5.2% in FY13E/14E. We observe 18-20% lower landed cost of lignite as compared to CIL coal in Gujarat which strengthens the argument of price increase.
m  Strong volume traction in lignite continues: We expect strong traction in lignite sales volumes to continue and maintain our lignite volumes estimates at 12.7/14 MT (growth of 12%/10.2%) for FY13E/14E. Higher industrialization led growth in Gujarat and diversified customer base of GMDC provide strong volume visibility.  Approvals for increase in EC limits of merchant mines are still awaited and Panandharo (north block) is expected to replace existing Panandharo as the regulated price lignite mine in 3-4 years time.
m  Lignite beneficiation could be a potential game changer: We see setting up of beneficiation plant of 1.5 mtpa at Bhavnagar (scalable if model is successful) as a potential game changer for the company. MoEF approval has been obtained and the project is expected to start operations within 6 months after obtaining pollution control board approval. We see net per tonne value addition of ~Rs200/tonne on account of beneficiated lignite sales and expect 1 MT of beneficiated volumes in FY14E resulting in net value addition of ~Rs200mn. 
m  Lignite power plant shows operational improvement, outsourcing remains the key: 250 MW lignite power plant at Nani Chher has shown operational improvements with average PLF of ~65% in Q2FY13E till date and is expected to reduce its EBIT losses significantly. GMDC is looking to outsource the operations to a third party vendor which remains the key to its sustainable and profitable operations in our view.
m  Bauxite and other divisions remain largely subdued: Company expects bauxite volumes of ~1 MT in FY13E notwithstanding the upcoming closure of VAL’s refinery and subdued domestic demand. Other divisions of fluorspar and manganese ore also remain largely subdued as of now. We see less than 5% revenue contribution of bauxite and other divisions combined for GMDC in FY13E/14E.
m  Valuations – Attractive: We continue to find the valuations highly attractive with the stock trading at 4.7x FY14E EV/EBITDA, which implies a steep unwarranted discount to both global coal miners’ average as well as CIL’s current valuation of 6.4x. The current valuations also remain well below GMDC’s 3 year and 5 year average historic multiples on both P/E and EV/EBITDA basis. We value the stock at 6x FY14E EV/EBITDA to arrive at a target price of Rs236. Maintain buy.

-- 

Gujarat Mineral Development Corporation Ltd. (GMDC) TARGET Rs.214 -Sushil Research

GMDC - Buy :: Business Line

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Exclusive mining rights, low operating cost and captive market are GMDC's strenghts.

Low-cost lignite operations, a steady expansion track record and healthy growing captive market in the form of Gujarat make Gujarat Mineral Development Corporation a good bet in the mining space.

The company's enterprise value/EBIDTA value of seven times is lower than that of Coal India and Neyvelli Lignite Corporation. This seems incongruous, given that GMDC has delivered volume and profit growth, which outpaces its larger peers.

The number is on a par with global peers. But with advantages such as exclusive mining rights, low-operating cost and captive market, the company is more likely to deliver on its premium. Despite gaining 29 per cent over the last one year, GMDC's shares at Rs 168 makes for a compelling buy for investors with a long-term horizon.

BUSINESS

GMDC operate in two segments: Mining and power. Lignite and bauxite dominate the mining portfolio in volume terms. Lignite, a form of coal used in power plants, accounted for over 77 per cent of overall sales in 2010-11.

The company sells lignite to Gujarat State Electricity Corporation, Adani Wilmar, Indian Rayon, and so on. GMDC mined and sold over ten million tonnes of lignite in 2010-11. Power generation came in a distant second, accounting for over 17 per cent of revenues. The rest is accounted for by a mix of bauxite, fluorspar and manganese.

The company's trump card is a result of Gujarat state policy to vest exclusive rights in the State for developing lignite, bauxite and manganese with GMDC. This circumvents the rather arduous process of obtaining permits faced by miners in other states. In addition to ramping up output at existing mines, GMDC has also managed to open several lignite mines. That saves considerable time for GMDC which only has to acquire an environmental and mining clearance.

While investors could be sceptical that the company's 785 million tonnes of proven lignite reserves could go the national way of being mired in bureaucracy, there are some encouraging signs for GMDC.

First, 74 per cent of the company is held by the Gujarat State government. So, in this particular case, the State government, which is aggressively pushing for investments, is well incentivised to get lignite mines up and running. Same goes for its sizable reserves of bauxite and limestone, both of which GMDC has.

In addition to its current operations, the company plans to exploit mining reserves through government-mandated minority stakes in value-addition projects.

Projects on the anvil for GMDC include alumina refineries, aluminium smelters and limestone supply for cement outfits.

Second, the company has grown its output at a compounded rate of 6.4 per cent per annum steadily between FY07 and FY11. These along with regular 10-15 per cent price hikes have more than doubled the company's revenues from lignite sales.

STRONG FINANCIALS

Since FY07, GMDC has seen sales and net profits grow at a compounded pace of 24.5 per cent and 41 per cent respectively to Rs 1,415 crore and Rs 375 crore respectively in FY2011.

The company has had a little help from segments such as power generation and bauxite. Increased production and realisations have seen revenues rise by almost four-fold and 12-fold to Rs 234 crore and Rs 63 crore respectively.

More recently, despite rains leading to mine-outages between July and August 2011, the six months ended September 2011 saw the company's net sales and profits rise by 20 and 34 per cent respectively to Rs 711 crore and Rs 216 crore respectively. The company benefitted from price hikes undertaken early in 2011.

The company's operating margins have hovered in the 46-54 per cent range since FY07. The fiscal ended 2011 witnessed operating margins of 46 per cent as the less-profitable power business chipped in with a bigger proportion of sales.

But the support to margins comes in the form of more mining with power generation remaining more or less constant.

Lignite mining is among the most profitable divisions for the company. By end-2014, the company is expected to mine 30 per cent more lignite. This is expected to aid volume growth.

Aiding GMDC's cause in sustaining robust profit and sales growth is the increasing proportion of sales to merchant customers.

They usually pay more for the company's lignite than the regulated yields from Gujarat State Electricity Corporation.

These clients and their growing demand is expected to help GMDC sustain sales and profit growth. The company's debt levels are negligible.

LIGNITE SCORES

The cost of generating power from lignite is lower than the cost of generating power from expensive coal.

This could make lignite the preferred fuel for Gujarat-based industrial producers setting up captive power capacity.

With the current supply-side restrictions on coal supply due to regulatory concerns and infrastructure bottlenecks, coal is neither cheap nor readily available, while lignite for power producers fits the bill.

The risk for GMDC is the enforcement of price controls in the event of higher power prices.

The high exposure to Gujarat poses a concentration risk. While at this point, the State does rank highly on GDP growth parameters, lignite prices will be among the target group in a downturn.

GMDC Ltd: Value for money STOCK ANALYSIS By Devdas Mogili :: Money Times

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GMDC Ltd: Value for money
STOCK ANALYSIS
By Devdas Mogili


Gujarat Mineral Development Corporation Ltd (GMDC), is a 48-year Govt. of Gujarat undertaking. Established in 1963. It is a mining and mineral processing company and is the largest merchant seller of Lignite in India. M. S. Sahu is the chairman of the company and V. S. Gadhavi IAS is the managing director.
GMDC produces lignite, bauxite, calcined bauxite, fluorspar and manganese ore. The company is also engaged in the generation of power and offers lignite for various industrial units engaged in textiles, chemicals, ceramics, bricks or for captive power.
The company commenced operations with a small sand crushing plant at Surendranagar which supplied graded sand to consumers all over Gujarat. The sand was used by various manufacturers of sodium silicate and glass industries. In 1968, the company commenced the next project, which was beneficiation of fluorspar, a rare mineral essential for basic industries like refining of steel, manufacturing of aluminium, hydrochloric acid, foundry flux and welding electrodes among others.
In the early 70's, the company commenced mining of lignite in Kutch district. In 1984, it started mining operations at Rajpardi near Ankleshwar.
In October 1997, the Government of Gujarat came out with an offer for sale of 82,68,000 equity shares of Rs.10 each at Rs.140 thereby diluting their stake to 74%.
During 2004-05, the company commenced operations in the mine at village Tadkeshwar in Surat District. The company commissioned the Sea Water Intake System, Desalination Plant, Fuel Oil Handling System, Cooling Water System and Air Compressor System & Other Auxiliary Systems.
During 2004-05, GMDC signed a MoU with RBG Minerals Industries, Udaipur, for developing the Ambaji Group Mining and a concentration project. In the same year, it completed the refractory dry out procedure of Boiler Unit I, which lead to lighting up the boiler by oil. After the light up, steam blowing activities were undertaken and the first unit was successfully synchronized with the GEB Grid during 2005.
In 2005-06, after commissioning the Material Handling System, the first unit was taken on Lignite Trials and successfully reached its rated capacity of 125 MW. The second unit was successfully synchronized with the Grid on 12 December 2005. Lignite dispatch from Tadkeshwar started from March 2006 on a commercial basis.
During 2006-07, the company executed a MoU with Gokul Refoils & Solvents Ltd for setting up a 125 MW captive power plant based on lignite from the Tadkeshwar mine. Also, the company executed a MoU with Jaypee Associates Ltd, New Delhi, for setting up a 2.4 million metric tones per annum (MMTPA) cement plant based on limestone.
During the year, the company entered into a joint venture with Gujarat Power Corporation and formed a company called, Bhavnagar Energy Company Ltd for 500 MW lignite based power plant at Bhavnagar. The unit 2 of power projects at Nani-Chher started commercial operation from 1 May 2005 whereas unit 1 was commercialized from March 2007.
During 2007-08, the company signed a MoU with Aluchem Inc, USA, for setting up of 1 MMTPA capacity Alumina based chemicals and speciality products based on Bauxite deposits. Also, the company was granted work permit by the Government of Gujarat for lifting of 1,00,000 MT of Manganese Waste Dump from Shivrajpur in Baroda.
In September 2007, the company started mining production in Amod Lignite Mine near Rajpardi and mining operations at the Bhavnagar mine commenced in April 2008 and the lignite production from September-October 2008.
Power Project - Nani Chher: During the year under review, the total generation of Akrimota Thermal power Station was 1,394 MUs.
Wind Farm: The 19.5 MW wind farm was commissioned in October 2009 and earned a revenue of Rs.3.37 crore. GMDC has further installed 81 MW of wind farm in two phases. The first phase of 40.5 MW was commissioned in 2010 and the next phase by end FY11.
New Projects: It plans to commence five lignite mines across Gujarat with total reserves of 91 million MT. It has also applied for mining lease in Ghala near Surat.
Cement Plant: In joint venture with the Jai Prakash Group, GMDC has set up 2.6 MMTPA Cement Plant for which it will supply the limestone.
Coal Block Development: It has been allocated two Coal blocks viz. at Morga-II in Chhatisgarh and at Naini in Orissa and has participated in a 50.50 joint venture with the Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC).
Alumina Plant: The State of Gujarat is bestowed with bauxite reserves of 137 MMT. In order to exploit this vast bauxite mineral wealth, it has executed MoU for setting up two Alumina Plants 1 MMTPA capacity at Kutch and the other is Saurashtra.
Fluorspar Beneficiation: It has entered in to several MoUs for mineral development and value addition with various business entities and proposes to set up 50:50 joint ventures with M/s Gujarat Fluoro Chemicals Ltd. and M/s Navin Fluorine International Ltd.


Silica Sand Beneficiation: It proposes to set up a 2 lakh MTPA Silica Sand beneficiation plant in joint venture with Asahi India Glass Co. and can sell its share of 1 lakh MTPA. The operation and maintenance of the plant will be carried out by M/s Asahi India Glass Co.
Speciality Alumina Chemicals: It has plans to set up Speciality Alumina Chemicals Plant in Gujarat based on its Bauxite at an investment of Rs.30 crore.
Brown Fuse Alumina - Tabular Alumina: It has entered in to two MoUs to set up Brown Fuse Alumina - Tabular Alumina plant based on Bauxite.
Integrated Coke Oven Plant: A 51:49 joint venture has been set up with Sunflag Iron & Steel Co. Ltd. to set up Gujarat State Min. & Resources Corporation Ltd.
Multi Metal Project, Ambaji: It has entered into an MoU with Binani Zinc Ltd. and Rajasthan State Mines & Mineral Development Corporation for setting up beneficiation plant with a capacity of 2000 tonnes per day (TPD) based on the deposits of Ambaji Deri and Basant Gadh, at an approximate project cost of Rs.239.11 crore. The proposed equity investment is GMDC - 25%, Binani-65% and RSMMDC-10%.
Performance: The company posted net sales revenues of Rs.1065.22 crore with a net profit of Rs.279.87 crore netting an EPS of Rs.8.80 (FV: Rs.2) for 2009-10.
Financial Highlights: (Rs. in lakh)
Latest Results: For Q3FY11, sales rose 33.63% to Rs.360.40 crore as against Rs.269.70 crore in Q3FY10 while net profit shot up by 42.53% to Rs.101.48 crore from Rs.71.20 crore in Q3FY10 recording an EPS of Rs.3.19 for the quarter and Rs.8.24 for the 9 months ended 31 December 2010.

Financials: GMDC has an equity base of Rs.63.60 crore with a book value of Rs.44.20 (FV: Rs.2).and a low debt:equity ratio of 0.26 with RoCE of 26.27% and RoNW of 21.33%.
Share Profile: The GMDC share with a face value of Rs.2 is listed and traded on the BSE/NSE under the B group. Its share price recorded a 52 week high/low of Rs.172.70/Rs.101.70. At its current market price of Rs.138, it has a market capitalization of Rs.4430 crore.
Dividends: The company has been paying dividends as shown here: FY10 - 125%, FY09 - 100%, FY08 - 100%, FY07 - 100%, FY06 - 60%, FY05 - 50%, FY04 - 45%, FY03 - 45%, FY02 - 40%.
Shareholding Pattern: The Government of Gujarat holds the majority stake of 74% and the balance of 26% is with the non corporate promoters, mutual funds and the investing public. Mutual Funds, like Franklin India, DSP BR, Sundaram, Tata, SBI, Religare, Mirae, have added the company’s shares to their various schemes.
Prospects: In 2009, the Government of Gujarat has announced a new mineral policy for development of mineral resources and emphasizes mineral based industrial growth.
Lignite: The lignite resources have been reserved for power generation and wherever possible, for underground coal gasification by State PSUs or by Joint Ventures with State PSUs. GMDC would continue to supply surplus quantity of lignite from its mines to the industries in Gujarat, in particular to small and medium industries on a long-term basis.
Bauxite: All new Bauxite bearing areas in Gujarat have been reserved for GMDC and it has been made the facilitating and channelizing agency for bauxite sale and exports. It would become the sole supplier to bauxite users in Gujarat for higher value addition.
Manganese: In addition to the existing 1153 hectares reserved for GMDC, the remaining areas of manganese reserves would be granted to captive users for forming a JV with GMDC to produce value added products like MnSo4, MnO, Ferro Alloys or EMD etc. The new mineral policy has made GMDC as a catalyst and a propeller in manganese based industries.
Conclusion: GMDC a Government of Gujarat undertaking with an excellent track record of paying dividends and performance is aggressively expanding and diversifying and is likely to post an impressive topline and bottomline in days to come.
At its current market price of Rs.138, the share price is discounted less than 15 times its 2009-10 earnings of Rs.8.8. Considering its leadership status, excellent performance and payouts and aggressive expansion plans, the share offers value for money for long-term investors.