GMDC

GMDC, India’s second largest lignite producer and India's largest merchant seller of lignite, with 6 open cast lignite mines, with an aggregate annual capacity of 88 lakh MT, 2 bauxite mines, 250 MW thermal power project in Kutch and 201 MW of Wind power projects, has posted another set of phenomenal earnings, with sky rocketing growth across all key parameters.

For Q1FY18, company’s PAT has come in at Rs. 143 cr against Rs. 90 cr QoQ and Rs. 115 cr YoY, showing handsome growth of 59% QoQ and 24% YoY, resulting in an EPS of Rs. 4.49 for Q1FY18, which was at Rs. 10.20 for whole of FY17. Lignite Mining Division has remained key growth driver, with segment EBIT seen in at Rs. 140 cr against Rs. 89 cr QoQ and Rs. 84 cr YoY, showing stellar growth of 57% QoQ and 67% YoY, with Lignite Mining Division EBIT margin now having risen to 27.97% from 18.2% QoQ, an expansion of over 970 bps, which is led by decline in the mine closure expenses and reduced over burden removal charges.

This is just the take off point for the company, as GST has been implemented from July 2017 onwards, which will be seen reflected very positively from Q2FY18 earnings onwards, as GST rate on lignite has been fixed at 5%, much lower than earlier effective rate of 37% applicable in Gujarat. Although anti-profiteering clause kicking in, company’s product will become more price competitive against competitors in Rajasthan and Tamil Nadu, who were earlier subject to lower VAT of 5-5.5% (vs 22.5% in Gujarat). Management has guided 10% improvement in profits thanks to GST, which will make GMDC probably the biggest beneficiary of the hallmark legislature. Also, consistently higher prices of imported coal and pet-coke are making many players from Cement sector moving to use of Lignite instead of imported coal, which can be clearly seen from the latest earnings.

Company is now estimated to report an EPS of Rs. 15 for FY18, while it has debt-free balance-sheet, with cash and inter-corporate deposits of Rs.1,300 cr., translating into cash per share of Rs.40.