Comments
Equirus Securities
GMDC (Long)
CMP: ₹73.2
Target: ₹139
GMDC paid about ₹30 crore to a Bhavnagar mining contractor as compensation for higher waste production in earlier years. Even on adjusting for this, EBITDA at ₹91 crore declined 31 per cent y-o-y to come in 14 per cent below expectations as 1) profitability of a thermal power plant was also lower due to lower PLF; and 2) there was some increase in the cost of production at Bhanagar and Umarsar mines with new contractors taking charge.
Despite a favourable demand environment amid higher coal prices, GMDC has not been able to capitalise on the same due to internal production-related issues. While Coal India has taken multiple price increases (via direct or indirect hikes), GMDC has been a laggard. lignite production for 3Q declined 21 per cent y-o-y as contractor changes and a delayed pick-up in production post monsoon impacted volumes, with a similar decline expected in 4Q as well. We now expect FY19/FY20 lignite production at 9.1/9.5 million tonne versus 9.8/10.9 mt earlier, leading to an 11 per cent/24 per cent cut in EPS. However, with cash & cash equivalents forming around 65 per cent of CMP, valuations are extremely attractive. Retain ‘long’ with a March 2020 DCF-based TP of ₹139 (versus ₹164 earlier).
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.