TAKEN FROM A LATEST RESEARCH REPORT BY GEOJIT-
GMDC, Gujarat government PSU major, has reported impressive performance for quarter and half year ended September 30, 2007. In Q2 FY 2007-08, Net sales spurted by 57.8% to Rs 181.09 crore (Rs 114.75 crore) mainly led by increased lignite production during the quarter. OPM% expanded to 52.83% (38.92%) mainly due to increased lignite throughput and lower operating expenditure as % of net sales dropped to 37.7% (50.1%). PBT (before extraordinary items) zoomed by 204% to Rs 56.31 crore (Rs 18.53 crore) on
account of expansion of operating margins. PAT jumped by 170% to Rs 41.76 crore (Rs 15.46 crore) after providing for increased effective rate of taxation of 25.4%.
For H1 FY 2007-08, net sales jumped by 50.6% to Rs 401 crore (Rs 266.30 crore) mainly led by higher sales of lignite – main product of GMDC (constitutes ~68% of total sales revenues). OPM% enhanced to 61.9% (51.1%) due to increased sales of lignite and lower operating expenditure. PBT (before extraordinary items) spurted by 300.8% to Rs 150.20 crore (Rs 37.5 crore) due to better operating performance. PAT shoot up by 268.4% to Rs 107 crore (Rs 29 crore) after providing higher effective rate of tax of 28.1%.
GMDC has enhanced lignite production from Mata No Madh and Tadkeshwar mines and will achieve their peak capacity by end of FY 2007-08. Mining operations has commenced in Amod mines in the month of September 2007 and lignite mining is expected to commence in Bhavnagar. Company has refurbished calcinations plant in Gadshisha and fluorspar unit in Kadipani and Ambaji Multi metal project is expected to commence operations shortly. Power project at Chher commenced operations in the month of March 2007
which will contribute significantly in future. With these initiatives, company will have 6 operational mines and other projects in state of Gujarat which will boost revenue potential in future.
GMDC has set itself a target to achieve Rs 10,000 crore enterprise over next few years, revenues of which will be derived mainly from Power and Mining businesses. Towards this objective, it has ventured into new projects –
Power projects:
Company has 16% stake in 480 MW BECL lignite based power plant in Bhavnagar and JV with Gokul Refoils for setting up 125 MW lignite based power plant at Tadkeshwar.
Two coal blocks allotted in state of Orissa and Chattisgarh which will be sufficient for generation of 5000 MW. Entered into Fuel supply agreement for setting up 1750 MW power plants in states of Chattisgarh and Maharashtra in JV with KSK Energy Ventures and company is likely to get nod from government for setting up another 1000 MW coal based power plant at Morga in Chattisgarh.
Mining projects:
Applied for 10 blocks (including 2 blocks allotted as above) with coal based thermal power generation plans and another 15 blocks for coal mining rights in states of Orissa, Chattisgarh and Jharkhand.
Alumina Projects : JV with Aluchem, USA for setting up alumina plant with capacity of 1 million tonne and also, JV with Ashapura Mine chem for setting up another alumina plant with same capacity of 1 million tonne.
Coal and Lignite gasification projects: 49:51 JV with Reliance Industries Ltd for coal / lignite gasification projects. This JV will set up at least 3 commercial gasification projects utilizing ~ 450 million tonne of coal / lignite.
Cement Plant: Entered into JV with Jaypee group for setting up 2.4 million tonne cement plant. This JV has proposed to develop captive jetty / port and SEZ for mineral based industries.
Other Projects: JV with Tata Refractories for setting up unit to manufacture refractories and castables from high grade bauxite. Other projects envisaged are manufacture of abrasives and zeolite based industries in Kutch, Gujarat.
All these projects (power & mining) will transform from mining PSU into Power and Mining & Metals Conglomerate in future.
At CMP of Rs 2552/- (Rs 10- paid up), share is trading at 30.3 times its expected FY 2008 EPS of Rs 84.1/-and at 20.2 times its expected FY 2009 EPS of Rs 126.2/-. Considering high visibility in power and mining businesses coupled with high scalability in these businesses, we expect huge growth to happen in future;
hence we recommend to “BUY” the share at CMP.
