GMDC spurts over 5%

GMDC, India’s second largest lignite producer and India's largest merchant seller of lignite was amongst the top gainers on the BSE when the markets opened for trade today. It went up over 5% to Rs.145.40 and is now at Rs.142 levels. Its 52-week high is at Rs.159.75.

The company posted fantastic numbers for Q1FY18. Its net profit rose 24% (YoY) and 59% sequentially at Rs.143 crore, giving an EPS of Rs.4.5.Its lignite mining division 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.

Our Editor, Mr.Sp Tulsian, in our Market Whispers column said, “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.”

Mr.Tulsian added, “the company is expected 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.”