Gujarat NRE Coke Results Analysis

Gujarat NRE Coke, country’s largest independent producer of met coke posted a very performance for the second quarter ended 30th September 2008. The second quarter continues to reflect the boom it had in the prices of coke and coal but the coming months would not start reflecting the fall in their prices.

The stock price went ex-bonus from 17th October and is currently at levels of Rs.30. The market is discounting the pressure on margins which the company is bound to face in the coming months. But that apart, which is today not an isolated case with just Gujarat NRE but a reality with all companies, all across the globe, the company remains sound. There have been some concerns about the management but these do not hold much truth, its just a perception which simply cannot be corrected. Infact the promoters have hiked their holding in the company by 4.8% through creeping acquisition route during April-October 2008 and it now stands increased at over 45%. It is also going ahead with its plans for the rights issue with differential voting rights (DVR) to the existing shareholders of the company in the ratio of 1 DVR share for 450 existing equity shares at a price of Rs 1,000 per DVR share.



The biggest positive in favour of the company is its sheer size and its operations in Australia. The company’s present coke production capacity of 1.006 million tonne is being expanded in a phased manner to 1.254 million tonne and 2.254 million by 31st March 2009 and 31st December 2010. It is also the only company owning and operating coking coal mines in Australia and both mines are now in production. During the current fiscal the ROM coking coal production from its two mines is expected to be in excess of 1million tonne and brownfield developments are underway to ramp up the production to beyond 7 million tones by 2012/13.


The long term outlook remains positive. Earnings are bound to take a hit as realizations have come down. But if one looks beyond H2, things look good at the current rate.
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