GMDC Again - excellent buy at this rate

Gujarat Mineral Development Corporation GMDC) is a Gujarat State government undertaking engaged in the business of lignite, bauxite and fluorspar mining as also power generation units based on lignite.

As expected, the company has posted a superlative performance. This is one company which would surely not complain about soaring prices! Reporting a 68% jump in net sales and a 133% jump in other income, the company clinched a very healthy bottomline. EBITDA was up 85% at Rs.574.20 crore and its interest outgo was actually down 5% though, this was offset by the 21% rise in depreciation. Yet, the company posted a whopping 160% rise in PBT at Rs.408.40 crore. And despite taxation burden going up by 179%, its PAT was up by a smart 150% at Rs.264 crore. On an equity of Rs.31.80 crore, it posted an EPS of Rs.16.60 crore. Obviously enthused by the performance, the company also went ahead and declared a 1:1 bonus.

Not the one to rest on the laurels, it is ploughing back all the bounty it is earning into building up more for the company. It is leveraging all the coal capabilities into cement, power, SEZ and port in Gujarat. How does it plan to do that? It is getting into a JV with cement unit and another with a power unit. The cement unit would also develop a mineral based SEZ and a port with GMDC. Thus GMDC would have a captive coal customer in each cement plant as well as power plant and the power plant would have captive customer in cement plant. Now that’s real foresight!

The company is presently producing about 80 lakh MT of lignite at its three mines. New mines have been developed at the various locations at Surat to cater to South Gujarat where estimated annual production would be 10 lakh MT. 10 lakh MT of lignite production at Amod near Bharuch would fully contribute in FY09. 30 lakh tonne of lignite production is estimated from Bhavnagar mines to cater to Saurashtra region and Central Gujarat. So, in FY 09, the production of lignite will get increased by about 40%. The company also has 250 MW power plant in operation based on lignite.

Lignite referred to as brown gold, is an alternative for coal, which is in great demand, as natural resources are becoming scarce all over the world. Currently quoted at Rs.289, a cum-bonus price, it is an excellent buy at this rate.
S.P.Tulsian