Despite the sharp correction in the stock markets in 2022 due to weak global cues, shares of Gujarat Mineral Development Corporation (GMDC) have given multibagger returns during the calendar year (YTD).
The stock has more than doubled investor wealth in 2022 YTD (year-to-date), rising over 120 percent. It has jumped from around ₹73 in December 2021 to ₹163 currently. In comparison, the benchmark Nifty has lost 8 percent YTD.
It is one of the very few stocks that have been able to give generous returns to its investors despite the overall weak market sentiment on the back of the ongoing Russia-Ukraine Crisis, surging crude oil prices, weakening rupee and aggressive Fed rate hike outlook.
The state-run lignite miner hit its 52-week high of ₹174 in intra-day deals today (March 8, 2022). Its 52-week low of ₹52 was hit on April 22, 2021; since then the stock has rallied 234 percent in less than a year.
GMDC currently has 5 operational lignite mines. The mines are located in Kutch, South Gujarat and Bhavnagar region. GMDC's five active lignite mines together produced 60.04 lakh metric tonnes (mt) of lignite during the FY 2020-21. It is the largest merchant seller of lignite in the country.
In the December quarter, the company's net profit jumped over 260 percent QoQ to ₹150 crore from ₹41.1 crore in the September quarter. Its total income also surged to ₹763.87 crore in October-December as against ₹494.30 crore a quarter ago.
Most experts expect the company's business momentum to continue given its focus on increasing volume in the future and improving the profitability of non-lignite operations.
"GMDC's financial performance reflects its robust infrastructure as the country's largest merchant seller of lignite. This is a validation of the company's collaborative approach to business transformation,” Roopwant Singh, Managing Director, GMDC said after the results.
Recently, the firm announced that it will enhance its lignite mining capacities while exploring other basic metals at its existing mines in North Gujarat. The mining major, which currently has about 85 percent operations in lignite mining, will soon start lignite mining at six more locations in the State.
Going ahead, domestic broekrage house Edelweiss Securities said that it expects significant price support as the company has taken hikes of 25–30 percent on average in lignite. However, variable expenses are also expected to increase owing to the higher cost of diesel, it added.
All in all, the brokerage perceives the risk-reward as balanced.
“We expect lignite sales to pick up from H2FY22, resulting in FY22 lignite offtake at 8.4mt—much lower than the FY19 level of 9.2mt, but significantly higher than the past two years’ average of 6.5mt. That said, we expect the recent price hike of 25– 30 percent taken across mines to spur earnings”, it noted.
