In the view of brokerage Edelweiss, mining company Gujarat Mineral Development Corporation (GMDC) is in an advantageous position due to increased production/realization in the existing lignite business and better prospects of revenue streams in auxiliary minerals.
Going forward, the brokerage looks to maintain the narrowed price discount for the option. It has maintained its ‘Buy’ rating at multibagger stock with a target price of 245 per share. Gujarat-based PSU Metal stock has soared over 160% so far in 2022 (Year-to-date), whereas, has skyrocketed around 255% in a year.
“In our view, GMDC is moving in the right direction as the management is making all appropriate efforts to: i) strengthen the existing business; ii) focus on price/volumes and dynamically align it as per market conditions and iii) emphasis on adjacent businesses-bauxite, bentonite and silica sand. We also anticipate a potential foray into rare earths as another value enabler,” the note said.
The brokerage believes that the next few months will be crucial for GMDC as BCG and ATK may present their recommendations and findings. Besides, lignite prices are likely to remain elevated as the management has structurally changed the pricing mechanics and sales process.
The Management of the Company noted that the income of the Company is likely to be diversified; Revenue from the Lignite portfolio will be reduced to 50% (currently 80%). Edelweiss explained that GMDC has appointed BCG to help create a strategic road map that goes beyond its traditional business and comprehensively covers opportunities in value-added products.
The performance of the Lignite division has progressively improved in recent quarters driven by both volumes and realizations. Management has also guided for volume growth of 10-15%/yr.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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