AUM Capital
Target: ₹168
CMP: ₹141.35
Gujarat Mineral Development Corporation Ltd is has five operational lignite mines and supplies local industries in Gujarat, while retaining a small portion for its own power plants. It also has two bauxite reserves.
A rise in prices of international coal prompts users to shift to cheaper sources like lignite, thereby raising demand. The Russian-Ukraine war has shot up coal prices from $237/tonne at the end of February to $390/tonne now. Sales for FY22 has gone up 104 per cent year-on-year to ₹2,732 crore, while EBIDTA has risen 484 per cent to ₹834 crore.
The demand for lignite in Gujarat is about 25-28 MT and GMDC produces about 8-9 MT. Hence, there is a huge scope for growth, given that the company targets volumes of about 10 MT for FY23. It is working on six new mining projects, with a capex of ₹670 crore for FY23.
The company plans to foray into manufacturing of rare-earth elements, and non-lignite businesses such as silica sand, Fluorspar, multi metal, and limestone for which it has roped in Boston Consultancy Group (BCG) for feasibility study. In the coming years, it aims to earn at least 50 per cent revenue from the non-lignite portfolio.
GMDC is a debt-free company with investments worth ₹668 crore at the end of March 2022. A change in top management last year proved effective in turning the company around.