GMDC - 4QFY2013 Result Update - Angel Broking

GMDC's 4QFY2013 net sales declined 17.6% to Rs. 443cr, mainly due to lower lignite sales volumes (- 20.5% yoy) to 3.1mn tonne. We maintain our Buy rating on the stock.

Lower costs mute EBITDA decline: The company's staff costs and other expenses declined by 16.0% and 26.8% yoy to Rs. 21cr and Rs. 200cr respectively and therefore the EBITDA declined at a lower rate of 9.0% yoy to Rs. 224cr whereas the EBITDA margin improved by 479bp. The power segment posted an EBIT loss of Rs. 63cr in 4QFY2013 as compared to an EBIT loss of Rs. 128cr in 4QFY2012. Higher other income and lower depreciation contained the decline in PAT to only 5.9%.

Outlook and valuation: GMDC beats other PSU miners in terms of efficiency, volume growth and ability to take price hikes. Despite these factors, GMDC is currently trading at an inexpensive valuation compared to its peers, which is unwarranted, in our view. GMDC ticks most boxes for a long-term view: A stock which is a virtual monopoly with proven ability to increase sales volume and prices, available at an inexpensive valuation. The key catalysts for the stock are likely to be: 1) lignite price hikes, 2) regulatory approvals for brownfield expansions, and 3) commencement of production from Umarsar mines. We value GMDC at an EV/EBITDA of 4.0x FY2015E with a target price of Rs. 193 and maintain our Buy rating.

Source : Equity Bulls

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