Gu­jarat Min­eral De­vel­op­ment Cor­po­ra­tion Ltd: Min­ing prof­its

Money Times - - Press Release Stock Pick Expert Eye - By Vi­hari

(BSE Code: 532181) (CMP: Rs.82.45) (FV: Rs.2) In­cor­po­rated in 1963, Gu­jarat Min­eral De­vel­op­ment Cor­po­ra­tion Ltd (GMDC)

oper­ates in two seg­ments: Min­ing and Power. It is the largest mer­chant seller of lig­nite in In­dia that sells 40% of its lig­nite to the govern­ment and has a power pur­chase agree­ment (PPA) with Gu­jarat Urja Vikas Nigam. There­fore, re­al­iza­tions in th­ese two seg­ments are as­sured.

In FY18, GMDC pro­duced 106.01 lakh tonnes of lig­nite from its 6 lig­nite mines at Panandhro, Mata-No-Madh, Ra­j­pardi, Tad­kesh­war, Bhav­na­gar and Umarsar. It ran 2 x 125 MW Ak­ri­mota ther­mal power sta­tions suc­cess­fully. Its power plant gen­er­ated 1,360 MUs with 62.107% PLF (plant load fac­tor). It pro­duced 2.609 lakh tonnes baux­ite from 8 op­er­at­ing mines in Kutch and 0.729 lakh tonnes baux­ite from its mines in Devb­hoomi Dwarka. Its wind farm projects of 200.9 MW achieved 21.8% PLF while its 5 MW so­lar power project ran at 15% CUF (ca­pac­ity uti­liza­tion fac­tor). It com­pleted ~35,000 me­ters of core drilling within the al­lot­ted Panandhro Ex­ten­sion and Bharkhan­dam lig­nite blocks and es­tab­lished ~55 mil­lion tonnes of lig­nite. It com­pleted ~20,000 me­ters of core drilling in Ghala lig­nite block as well and es­tab­lished 21 mil­lion tonnes of lig­nite.

GMDC con­tin­u­ously un­der­takes ex­plo­ration ac­tiv­i­ties in Gu­jarat to es­tab­lish min­eral re­serves. It has also car­ried out ge­o­log­i­cal map­ping us­ing satel­lite im­ages and GIS tech­nol­ogy over pos­si­ble baux­ite and la­t­erite bear­ing ar­eas in Kutch and es­tab­lished ad­di­tional baux­ite bear­ing ar­eas for stage-II ex­plo­ration. It has es­tab­lished 18 mil­lion tonnes of

ad­di­tional lig­nite re­serves in Mata-no-Madh along with 1,500 mil­lion tonnes of lime­stone re­sources in Kutch. Fur­ther, it is set­ting up a 40,000 TPA fluorspar ben­e­fi­ci­a­tion plant at Kadi­pani to­gether with Gu­jarat Flu­o­ro­chem­i­cals Ltd and Navin Flu­o­rine In­ter­na­tional Ltd.

For FY18, GMDC re­ported 9% higher PAT of Rs.353.06 crore on 31% higher sales of Rs.2069.97 crore with an EPS of Rs.11.10 and a div­i­dend of 175% was paid. Dur­ing Q1FY19, it re­ported 31% higher PAT of Rs.186.76 crore on 11% higher sales of Rs.645 crore and an EPS of Rs.5.87.

With an eq­uity cap­i­tal of Rs.63.6 crore and re­serves of Rs.4288.31 crore, GMDC’s share book value works out to Rs.136.85. It is a debt-free com­pany. In­vest­ments, cash and loans given were Rs.1964 crore whereas the value of its gross block was Rs.2275 crore as at FY18. The govern­ment holds 74% of the eq­uity cap­i­tal, for­eign en­ti­ties hold 4.7%, DIs hold 10.6% and PCBs hold 1.2%, which leaves 9.5% stake with the in­vest­ing pub­lic. The Min­istry of Coal, Govern­ment of In­dia, has al­lot­ted three lig­nite blocks (Panandhro Ex­ten­sion and Bharkan­dam in Kutch and Ghala in Su­rat) to GMDC for power gen­er­a­tion and gen­eral min­ing un­der an auc­tion through com­pet­i­tive bid­ding. Col­lec­tively, th­ese three lig­nite blocks have es­ti­mated 34 mil­lion tonnes of lig­nite re­serves. GMDC signed the first MoU with Adani Ce­men­ta­tion for the up­com­ing clink­er­ing unit in the Kutch re­gion. This ~Rs.5500 crore project is pro­jected to be com­mis­sioned by 2020. It signed the sec­ond MoU with Shree Ce­ment for the up­com­ing ce­ment plant, cap­tive power plant and jetty in Kutch. This ~Rs.3000 crore project is pro­jected to be com­mis­sioned by 2021. Kutch is one of the most re­mote dis­tricts in Gu­jarat and any eco­nomic ac­tiv­ity in this area will ben­e­fit the lo­cal pop­u­la­tion sig­nif­i­cantly.

GMDC is set­ting up a 500 MW lig­nite-based power project at Bhav­na­gar in a joint ven­ture (namely Bhav­na­gar En­ergy Co. Ltd) with 7 other PSUs of the Govern­ment of Gu­jarat. GMDC’s eq­uity in this joint ven­ture is 23.36%. Fur­ther, the Govern­ment of Gu­jarat has ap­proved its plans for set­ting up a Ze­o­lite plant for Ze­o­lite and other value-added prod­ucts in a joint ven­ture with Credo Min­eral In­dus­tries Ltd. GMDC will sup­ply 1,20,000 TPA NPG baux­ite from Kutch to the com­pany.

GMDC is in the process of set­ting up a 1,50,000 TPA sil­ica sand ben­e­fi­ci­a­tion plant on Built-on-Op­er­ate (BOO) or Buil­ton-Op­er­ate-Sales (BOOS) or any suit­able busi­ness model where it will cater sil­ica sand from its Ra­j­pardi lig­nite project. It is also in the process of mak­ing a long-term sup­ply agree­ment of lig­nite and ben­tonite with a com­pany for its cur­rent and up­com­ing bio-fer­til­izer unit in Gu­jarat. As the mar­ket of over­bur­den min­er­als like sil­ica sand, ball clay and ben­tonite is grow­ing, en­ter­ing into the ben­e­fi­ci­a­tion in­dus­try of th­ese over­bur­den min­er­als will have a larger scope in terms of rev­enue, cus­tomer base and mar­ket share.

The six min­ing leases, which are re­served by the cen­tral govern­ment for GMDC, will boost lig­nite pro­duc­tion and con­trib­ute to GMDC’s top-line. More­over, there are large lime­stone re­serves at GMDC’s up­com­ing Lakh­pat Pun­ra­jpur min­ing lease area and ex­ist­ing Panandhro mine. The man­age­ment is count­ing on th­ese re­serves and ap­proach­ing var­i­ous ce­ment com­pa­nies in In­dia as well as abroad for set­ting a ce­ment plant where GMDC will be a long-term sup­plier of lime­stone.

Based on its cur­rent go­ing and bright in­dus­try prospects, GMDC is likely to notch an EPS of Rs.13.5 in FY19. At the CMP of Rs.82.45, the stock trades at a for­ward P/E of 6.10x. A rea­son­able P/E of 10x will take its share price to Rs.135 in the medium-term.

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