1
Nov 16, 2017
Gujarat Mineral Development Corporation Ltd
Recommendation (Rs.)
CMP (as on Nov 16, 2017) 158
Target Price 185
Previous Target Price 161
Upside (%) 17
Stock Information
Mkt Cap (Rs.mn/US$ mn) 49862 / 764
52-wk High/Low (Rs.) 181 / 89
3M Avg. daily volume (mn) 0.5
Beta (x) 1.3
Sensex/Nifty 33107 / 10215
O/S Shares(mn) 318.0
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 74.0
FIIs 4.2
DIIs 11.5
Others 10.4
Stock Performance (%)
1M 3M 6M 12M
Absolute 8 12 18 59
Relative to Sensex 6 7 9 27
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar - Consolidated (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Net Sales 14189 12153 15824 20570 25713
EBITDA 5217 2888 4174 5570 7163
EBITDA Margin (%) 36.8 23.8 26.4 27.1 27.9
Net Prot 5003 2190 3241 4270 5556
EPS (Rs.) 15.7 6.9 10.2 13.4 17.5
RoE (%) 15.4 6.0 8.4 10.2 12.2
PE (x) 7.1 9.2 12.0 11.7 9.0
Source: Company, Karvy Research, *Represents multiples for FY15, FY16 & FY17 are based on historic market price
Earnings Revision (%)
YE Mar FY18E FY19E
Sales (%) 15.3 25.3
EBITDA (%) (4.9) (2.6)
PAT (%) (6.3) (5.2)
Source: Karvy Research
Company Update
India Research - Stock Broking
BUY
Analyst Contact
Kiran Shankar Prasad
040 - 3321 6275
kiran.prasad@karvy.com
Energy-Oil, Gas & Coal
Gujarat Mineral Development Corporation Ltd
Bloomberg Code: GMDC IN
Lignite Competitiveness under Lower GST Regime Driving
Growth
Continuance of superior performance: GMDC has posted strong set of
operating numbers during Q2FY18 and half year ended on Sept 30, 2017. The
standalone revenue for Q2FY18 came in at Rs.3457 Mn as against Rs.2477 Mn in
Q2FY18, registering growth of 39.6% YoY basis. Such excellent showing has been
on account of big jump in mining revenue to Rs.2626 Mn recording growth of 60.8%
YoY basis. EBITDA for Q2FY18 stood at Rs.1008 Mn which grew by 38.7% YoY basis
and in the process contributed EBITDA margin to expand by 264 bps on YoY basis.
PAT for Q2FY18 came in at Rs.1130 Mn having registered growth of 55.2% on YoY
basis while contributing PAT margin to expand by 329 bps. Taking half year ended on
Sept 30, 2017 performance into account, the revenue in H1FY18 came in at
Rs.9288 Mn, registering 41.1% growth on YoY basis as compared to corresponding
half year. EBITDA for H1FY18 came in at Rs.2841 Mn up by 38.7% on YoY basis
but corresponding margin contracted by 53 bps on YoY basis. PAT for H1FY18 was
up by 36.4% to Rs.2560 Mn but margin got contracted by 96 bps.
Segment Performances: The company witnessed rebound in its Mining revenue
in Q2FY18 which rose to Rs. 2626 Mn recording growth of 60.8% on YoY basis
whereas Power recorded revenue at Rs.1081 Mn which declined by 11.7% on YoY
basis. Mining revenue in H1FY18 grew by 55.4% to Rs.7614 Mn whereas Power
revenue during the same period recorded attish growth of -0.3% to Rs.2361 Mn.
Mining and Power contributed 76.3% and 23.7% respectively in total revenue during
H1FY18 as against 67.4% and 32.6% in H1FY17, thereby clearly establishing trend
of growing demand for mining & minerals under lower GST regime.
Valuation and Outlook
GMDC operates in two segments: Mining & Power; with credential of being the
largest merchant seller of lignite in the country. Lignite, being cheaper substitute
for coal, received further boost in its sales with the implementation of GST at 5%.
The fact that company sells 40% of total lignite volume to the government and has
Power Purchase Agreement (PPA) with Gujarat Urja Vikas Nigam Ltd, realizations
in these two segments are assured. Sound nancial health along with brighter sales
prospect enables the company to command premium on its stock price. The stock
is currently trading at EV/EBITDA 6.9x of FY19E and we value it at EV/EBITDA 8.1x
of FY19E which gives upwardly revised target price of Rs.185, reecting potential
upside of 17% for next 9-12 months.
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Sensex
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Nov 16, 2017
Gujarat Mineral Development Corporation Ltd
Exhibit 2: Q2FY18
YE Mar (Rs. Mn) Q2FY18 Q1FY18 QoQ % Q2FY17 YoY % H1FY18 H1FY17 YoY%
Turnover 3457 5831 (40.7) 2477 39.6 9288 6582 41.1
Expenditure 2449 3998 (38.7) 1820 34.6 6447 4534 42.2
EBITDA 1008 1833 (45.0) 657 53.5 2841 2048 38.7
Depreciation 369 386 (4.5) 335 9.9 755 653 15.6
Interest 4 4 1.6 3 27.9 8 6 35.5
Other Income 313 259 20.8 584 (46.4) 572 1066 (46.3)
PBT 949 1702 (44.3) 902 5.1 2651 2455 8.0
Ta x (182) 273 NM 174 NM 91 578 (84.3)
PAT 1130 1429 (20.9) 729 55.2 2560 1877 36.4
EBITDA Margin (%) 29.2 31.4 (228) bps 26.5 264 bps 30.6 31.1 (53) bps
EBIT Margin (%) 27.5 29.3 (171) bps 36.5 (900) bps 28.6 37.4 (877) bps
Net Prot Margin (%) 32.7 24.5 818 bps 29.4 329 bps 27.6 28.5 (96) bps
Source: Company, Karvy Research
Exhibit 3: Segmental Financials
Q2FY18 Q1FY18 QoQ % Q2FY17 YoY % H1FY18 H1FY17 YoY (%)
Segment-wise revenues (Rs. Mn)
Mining 2626 4989 (47.4) 1633 60.8 7614 4899 55.4
Power 1081 1281 (15.6) 1224 (11.7) 2361 2368 (0.3)
Segment-wise EBIT (Rs. Mn)
Mining 603 1396 (56.8) 101 494.1 1998 937 113.2
Power 231 237 (2.6) 329 (29.9) 467 677 (31.0)
Segment-wise EBIT Margin (%)
Mining 23.0 28.0 (502) bps 6.2 1674 bps 26.2 19.1 711 bps
Power 21.3 18.5 285 bps 26.9 (553) bps 19.8 28.6 (879) bps
Source: Company, Karvy Research
Key Risks
Opening up of mining sectors may result in sti price competition.
Cheapening cost of solar and wind energy.
Delay in land acquisition for mining purpose.
Exhibit 4: Revised Earnings Estimates
YE Mar - Consolidated (Rs. Mn)
FY18E FY19E
Old New % Change Old New % Change
Net Sales 17841 20570 15.3 20517 25713 25.3
EBITDA 5855 5570 (4.9) 7355 7163 (2.6)
EBITDA Margin (%) 32.8 27.1 (572) bps 35.8 27.9 (794) bps
PAT 4558 4270 (6.3) 5861 5556 (5.2)
EPS (Rs.) 14.3 13.4 (6.1) 18.4 17.5 (5.0)
Source: Karvy Research
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Nov 16, 2017
Gujarat Mineral Development Corporation Ltd
Consolidated Financials
Exhibit 5: Income Statement
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Revenues 14189 12153 15824 20570 25713
Growth (%) 10.0 (14.3) 30.2 30.0 25.0
Operating Expenses 8972 9265 11649 15000 18549
EBITDA 5217 2888 4174 5570 7163
Growth (%) (15.3) (44.6) 44.5 33.4 28.6
Depreciation & Amortization 1373 1307 1513 2039 2565
Other Income 1440 1550 1815 2357 3058
EBIT 5284 3131 4477 5888 7656
Interest Expenses 17 11 13 14 12
PBT 5267 3120 4463 5874 7644
Tax 1355 937 1218 1604 2087
PAT 5003 2190 3241 4270 5556
Growth (%) 14.3 (56.2) 48.0 31.8 30.1
Source: Company, Karvy Research
Exhibit 6: Balance Sheet
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Cash & Cash Equivalents 393 622 497 575 861
Trade receivables 811 974 1265 1065 1359
Inventory 521 435 688 720 787
Loans & Advances 149 190 179 198 210
Net Block 19772 20279 23008 24345 25833
Other assets 23688 24521 25575 30090 35349
Total Assets 45333 47022 51213 56995 64398
Current Liabilities 3500 4182 4450 5971 7526
Debt 0 0 0 0 0
Other Liabilities 5487 5876 6688 7632 8878
Total Liabilities 8987 10059 11138 13604 16405
Equity capital 636 636 636 636 636
Reserves & Surplus 35710 36327 39439 42755 47357
Total Networth 36346 36963 40075 43391 47993
Total Networth & Liabilities 45333 47022 51213 56995 64398
Source: Company, Karvy Research
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Nov 16, 2017
Gujarat Mineral Development Corporation Ltd
Exhibit 7: Cash Flow Statement
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
PBT 5267 3120 4463 5874 7644
Depreciation (as recorderd in cash ow statement) 1355 1316 1510 2039 2565
Net Interest ow 0 0 0 (14) (12)
Tax Paid (2177) (1594) (1335) (1604) (2087)
Inc/dec in Net WC (2263) 369 1270 (1075) (1994)
Others (1171) (1168) (1383) (2357) (3058)
Cash ow from operating activities 1011 2043 4525 2863 3057
Inc/dec in capital expenditure (762) (1559) (4594) (3376) (4053)
Inc/dec in investments (387) 1076 1033 (826) (823)
Others 1020 (185) 59 2357 3058
Cash ow from investing activities (129) (669) (3503) (1846) (1818)
Dividend paid (1114) (1149) (1149) (954) (954)
Cash ow from nancing activities (1114) (1149) (1149) (954) (954)
Net change in cash (232) 225 (126) 64 285
Source: Company, Karvy Research
Exhibit 8: Key Ratios
YE Mar FY15 FY16 FY17 FY18E FY19E
EBITDA Margin (%) 36.8 23.8 26.4 27.1 27.9
EBIT Margin (%) 37.2 25.8 28.3 28.6 29.8
Net Prot Margin (%) 35.3 18.0 20.5 20.8 21.6
Dividend Payout Ratio (%) 19.1 43.6 29.4 22.3 17.2
Net Debt/Equity (x) (0.01) (0.02) (0.01) (0.01) (0.02)
RoE (%) 15.4 6.0 8.4 10.2 12.2
RoCE (%) 16.3 8.5 11.6 14.1 16.8
Source: Company, Karvy Research
Exhibit 9: Valuation Parameters
YE Mar FY15 FY16 FY17 FY18E FY19E
EPS (Rs.) 15.7 6.9 10.2 13.4 17.5
DPS (Rs.) 3.0 3.0 3.0 3.0 3.0
BVPS (Rs.) 114.3 116.2 126.0 136.4 150.9
PE (x) 7.1 9.2 12.0 11.7 9.0
P/BV (x) 1.0 0.5 1.0 1.2 1.0
EV/EBITDA (x) 6.8 6.8 9.2 8.9 6.9
EV/Sales (x) 2.5 1.6 2.4 2.4 1.9
Source: Company, Karvy Research; *Represents multiples for FY15, FY16 & FY17 are based on historic market price
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Nov 16, 2017
Gujarat Mineral Development Corporation Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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