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Gujarat Mineral Development Corporation Limited

July 22, 2014 by sknlakshmi

Gujarat Mineral Development Corporation Limited (GMDC) is a major minerals and lignite mining company of India. It is State owned company owned by Government of Gujarat. GMDC was founded in 1963. Its corporate headquarters is at Ahmedabad. It operates through exploring, developing, producing and distributing sectors of mineral resources. Gujarat Mineral’s key projects include Kadipani fluorspar project, Bhatia bauxite projects, Ambaji multi-metal project, Shivrajpur manganese project, Akrimota Power Project, and Gadhshisha Calcination Project. The company produces lignite, bauxite, fluorspar, ball clays, bentonite, limestone, silica sand and manganese. The company’s lignite projects include the Panandhro, Rajpardi, Bhavnagar, Mata-No-Madh and Tadkeshwar projects. It carries out its mining activities in Kutch, Jamnagar, Bharuch, Baroda, Banaskantha, Surat, Bhavnagar and Panchmahal districts of Gujarat.  Gujrat government as given its green signal to GMDC to form a joint venture with NALCO for a 1 mtpa refinery

The Asia-focussed broker is of the view that driven by better financial performance, Gujarat PSUs have significantly outperformed PSU Index and have performed inline with the broader market over the last 5,10 years.

PSU stocks are expected to be re-rated in terms of valuations on expectation of better governance of Central Government. PSU stocks and infrastructure related stocks may get a boost due to a stable government at the Centre 

SWOT Analysis  

Strength 

  • The company held Strong Assets, Owns bauxite, manganese, lignite and fluorspar mines in Kutch, Gujarat
  • It recorded a strong Financial Position.  In all financial year the company had higher gross profit margin, which stated that the company has maintained its production cost to a limited range and has made a high amount of profit.
  • The equity position of the company was good and the value of debt ratio had decreased compare to previous year that indicates that the company had safe view.
  • The company is Nationalized, thus enjoyed customer confidence
  • It has got strong negotiating power, as resources owned and minerals produced are key to other secondary industries 
  • The company is expertise in sustainable mining
  • The company had registered strong performance in the  last quarter, which makes this stock attractive. 
  • It is available at very decent valuations and the recent correction that we have seen in the stock also makes it more attractive.
  • The uptick in volume to bring growth in revenue, Lignite based power plant's operational performance is likely to improve and result in higher profitability 

Weakness

  • It has limited operations in Gujarat only
  • Locational disadvantage – iron and steel plants located in Jharkhand 
  • The operating expense of the company should have been kept to a minimum value so as to make high profit
  • The company should have tried to decrease its debt so as to make debt-equity ratio to a minimum value.
  • There are huge gap between G.P and Net profit margin need to reduce the operating expenses for increment of net profit margin.

Opportunity

  • Investment in mechanization and improvement in technology
  • Diversification in other minerals
  • The company entered in to Joint venture to expand business 
  • The Mining industry in India is a major economic activity which contributes significantly to the economy of India.  Indian mining industry provides job opportunities to around 1.10 million individuals. The GDP of the total industrial sector it contributes around 10% to 11%
  • Few Gujarat based companies which has strong business franchise with reasonable financial can have robust upside going forward on positive outcome of election results.

Threats 

  • Regulatory pressure on business 
  • Tough competition, and presence of private players also affects the business of the company

Peer Group comparison

 

Particulars

GMDC

Coal India

NLC

Price

157.25

376.70

97.45

Mkt Cap

5012

237306

16324

Sales

1830

11440

6173

Net profit

601

9794

1460

EPS (TTM)

13.81

23.76

9.39

Book Value

93.52

56.24

86.15

P/E

11.39

15.85

10.38

 

Sector – Mining 

Technicals 

52 Week high –Rs 180.7

52 Week low -Rs76.25

Support & Resistance -149/170

 

 

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