Q3FY20 result- Operationally in losses; other income saves the day
GMDC reported its worst ever operating performance in over a decade with EBITDA of Rs131m (IDFCe: Rs452m). Both of its business segments, lignite and power, disappointed with power slipping into EBIT losses again. Lignite segment suffers from higher mining cost which inturn was due to lower volume and higher stripping ratio at Mata-No-Madh mines (46% of volume). Other income, at Rs394m, was up 11% yoy and constitutes 133% of PBT in Q3FY20.
Key Negatives: Lower lignite and power volumes, higher mining cost
Key Positives: Higher lignite realisation
Impact on financials: Reduce FY20/FY21 EBITDA by 23%/25% to factor in higher mining cost, lower lignite and power volume
Valuation & view: Reiterate Outperformer with reduced TP of Rs78
GMDC’s profitability remain adversely affected due to lower lignite volume, higher stripping ratio and lower power generation. The company is unable to ramp up volumes in Bhavnagar and Mata No Madh mines and has to supply lignite to its power plant at a loss. Any meaningful earning recovery for GMDC will happen only when we visualise some volume growth, which is missing currently. The only solace is that GMDC has cash of Rs10.4bn (Rs33/sh) at Q2FY20-end which is 56% of CMP. At CMP of Rs59, the stock is trading inexpensive at 2.0x FY21E EV/EBITDA. With cut in earnings, we reduce our target price to Rs78 (Rs91), valuing the stock at 4.0x FY21E EV/EBITDA.​
Gujarat Mineral Development Corporation Ltd. Gujarat Mineral Development Corporation Limited is a holding company. The Company operates through two segments: Mining and Power. The Company's projects include Lignite, Bauxite, Fluorspar, Multi-Metal, Manganese, Power, Wind and Solar. It operates over six lignite mines, namely, Panandhro, Mata-No-Madh, Rajpardi, Tadkeshwar, Bhavnagar and Umarsar. The Company has bauxite mining operations at its Mewasa Bauxite Mines in Devbhoomi Dwarka, district of Gujarat. The Company's Fluorspar project is located at Kadipani, district of Baroda. The Company's Multi-Metal project is located at Ambaji, district of Banaskantha. The Company's Manganese project is located at Shivrajpur, district of Panchmahal. Its Power project is located at Nani Chher, district of Kutch. The Company's Wind Farm projects of 150.9 megawatts are situated at different locations in Gujarat, and a five megawatt peak Solar Power Project is situated at Panandhro Lignite Project.
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