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Investor Presentaiton

furtisments HV-RYE GMDC Ltd. HDFC securities G Click. Invest. Grow. YEARS Industry LTP Industrial Minerals Rs 161.7 HDFC Scrip Code BSE Code NSE Code Bloomberg CMP August 05, 2022 Equity Capital (Rs Cr) Equity Share O/S (Cr) Face Value (Rs) Recommendation Base Case Fair Value Bull Case Fair Value Time Horizon Buy on dips in Rs 160-163 band and add on dips in Rs 144-147 band Rs 179 Rs 195 2-3 quarters GUJMINEQNR Our take: 532181 GMDCLTD GMDC IN 161.7 63.6 2 31.8 5142.1 149.9 3749003 228.4 57.6 Market Cap (Rs Cr) Book Value (Rs) Avg. 52 Wk Volumes (NSE) 52 Week High 52 Week Low Share holding Pattern % (Jun, 2022) Promoters 74.0 Institutions 5.7 Non Institutions Total HDFCsec Retail research stock rating meter for details about the ratings or at the end of the report * Refer at the end for explanation on Risk Ratings Fundamental Research Analyst Pranav Jain [email protected] 20.3 100.0 Gujarat Mineral Development Corporation Ltd. (GMDC) is one of India's leading mining and mineral processing companies. is India's second largest Lignite-producing company. The company is also involved in the exploration of Bauxite, Fluorspar, Manganese, Silica Sand, Limestone, Bentonite and Ball Clay and also has a sizeable presence in energy sector. In FY22, the company posted its best ever annual results over the last 5 years and the 2nd best in the company's life so far after posting a shocking net loss in FY21. The company has embarked on a major transformative exercise to change its fortunes and has roped in four top global management consulting firms- Boston Consulting Group (BCG), McKinsey & Co, AT Kearney and Deloitte to achieve its targeted objectives, production diversity and increased profitability. Being the only miner of Lignite in Gujarat places it is at an advantageous position with regards to its customers. Purchasing of coal from Coal India located about 700 km away proves to be a logistic issue as well as high transportation cost. Hence, they prefer Lignite produced by GMDC though lignite carries lower calorific value. GMDC's customers mainly comprise of small to medium players whose boilers are designed to run on domestic lignite. In FY22, ~90% of the revenue comes from mining. Valuation & Recommendation: A change in the top management last year proved effective in turning around the company in FY22. Also, rise in prices of international coal prompts users to shift to cheaper sources like lignite, thereby raising demand. Further, the Russia-Ukraine war has shot up coal prices and global coal prices are expected to remain robust in the medium term as natural gas has become scarce due to export cutback by Russia. The demand for lignite in Gujarat is about 25-28 million tons (mt) and GMDC produces about 8.5mt. 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 (having reserves of 540mt) with a capex of Rs 670 crores for FY23. Management's focus is to diversify the revenue base of the company from lignite and so 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 BCG for feasibility study. In the coming years, it aims to earn at least ~50% revenue from the non-lignite portfolio. This will help the company to mitigate the risk of dependence on a single commodity and also improve the ESG rating of the company. The company is planning to develop 6 new mines over next 1.5-2 years to ensure that production stays above 10 million tons per annum (mtpa). Further, there is a distinct focus on value added products in Bauxite and other minerals. 2 FRETAILRES RETAILRESEARCH
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