Multibagger mining stock rallies 134% this year. Edelweiss sees more upside
Premium- The Gujarat-based multibagger stock has rallied over 134% in 2022 (YTD) so far
Brokerage and research firm Edelweiss attended the conference call organised by Gujarat Mineral Development Corporation's (GMDC) management to discuss the Q1FY23 results. In a note, it highlighted key points for the company: Core lignite business has sprung back, the power business’s losses have narrowed, a BCG study has identified a wide range of adjacent revenue streams.
“Initial prognosis pertaining to rare earth mining appears encouraging. In our view, the lignite business is expected to be complemented by new revenue streams progressively, starting off with bauxite and manganese. While multi-metal and rare earth mining projects are still in their infancy, the prospects seem to be promising," the note stated.
The brokerage house has maintained ‘Buy’ rating on GMDC shares with an unchanged 12-month target price of ₹230. The Gujarat-based PSU metal stock has rallied over 134% in 2022 (year-to-date or YTD) so far, whereas, the multibagger stock has skyrocketed about 174% in a year's period. GMDC is a mining and mineral processing company in India.
“Over past one year, GMDC has turned over a new leaf with the lignite business back at 10mtpa production rate and record realisation. Despite our estimates of declining prices (10% QoQ progressively), we expect FY23E EBITDA at a record ₹13.1 bn," the brokerage said.
With the power division already at breakeven, Edelweiss expects higher generation at both the thermal and wind power plants to further lift performance, and it anticipates future opportunities in limestone, silica sand mining, and multi-metals to diversify the earnings base effectively. Besides, management has on-boarded Mackenzie for the rare-earth business.
“While this is still in infancy, initial signs are encouraging in our view. Additionally, the net cash position and ongoing robust accretion provide enough balance sheet strength to aggressively pursue growth opportunities," it added.
The company's management expressed confidence that there might be several opportunities such as multi-metal projects, limestone and silica sand mining over the medium term. “In the near term, management intends to increase the revenue proportion (ex-lignite and power) to 3% from 2% currently. We also believe rare earth mining holds interesting prospects and would keep further tabs on the developments in this regard."
MINT PREMIUM See All
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less