SYNOPSIS: Nuvama reaffirmed its “reduce” rating on GMDC with a Rs. 231 target, citing weak Q2 performance, lower EBITDA estimates, elevated valuations, and reliance on FY27 lignite volume recovery and upcoming mine expansions for growth.
Shares of one of India’s leading mining PSUs and India’s second-largest Lignite-producing company and top merchant seller of Lignite tumbled nearly 5 percent on BSE, after Nuvama has maintained its “reduce” rating with a target of Rs. 231 per share, implying a potential downside of about 57 percent from current levels.
At 01:45 p.m., the shares of Gujarat Mineral Development Corporation Limited were trading in the red at Rs. 540.5 on BSE, down by around 4 percent, as against its previous closing price of Rs. 563.75, with a market cap of Rs. 17,188 crores.
The stock has delivered positive returns of over 65 percent in the last one year, but has fallen by around 7 percent in a month.
Brokerage Target & Outlook
Brokerage firm Nuvama has maintained its “reduce” rating on Gujarat Mineral Development Corporation Limited, assigning a target price of Rs. 231 per share, representing a downside of nearly 57 percent from the current price levels.
The brokerage revised its FY26E and FY27E EBITDA estimates downward by 10 percent and 15 percent, respectively, to reflect expectations of lower lignite volumes and higher operating costs. While the company’s thermal power plant became operational in Q2 FY26 and is expected to ramp up by Q4 FY26, stronger growth is anticipated in FY27, supported by a 26 percent increase in lignite volumes following the commissioning of a new mine and the expansion of the Bhavnagar mines.
Additionally, the Baitarani coal mine is scheduled to commence operations in FY27. Rolling forward to FY28 estimates results in an unchanged target price of Rs. 231, valuing the stock at 6x EV/EBITDA. The brokerage maintained its ‘Reduce’ stance, noting the stock currently trades at 19.4x FY27E EV/EBITDA.
On the financial front, GMDC would have reported a net loss in the September quarter if not for a one-time gain. Revenue declined 11 percent year-on-year, while EBITDA dropped by nearly half. The EBITDA margin also contracted sharply to 13.2 percent, compared with 24 percent in the same quarter last year, reflecting significant pressure on profitability.
The thermal power plant, which became operational during the September quarter, is expected to achieve meaningful ramp-up only by the fourth quarter of the current financial year. As a result, GMDC is projected to witness a 26 percent increase in lignite volumes in FY27, supported not only by the plant’s improved utilisation but also by the planned expansion of the Bhavnagar mine.
Nuvama also noted that any meaningful earnings contribution from the company’s rare earths venture is unlikely before FY30. The brokerage highlighted that its forecasts already incorporate the expected benefits from lignite, coal, and power operations.
Financials & More:
GMDC reported a marginal decline in revenue from operations, experiencing a year-on-year decrease of nearly 11 percent, from Rs. 593 crores in Q2 FY25 to Rs. 528 crores in Q2 FY26.
In contrast, the company’s net profit increased during the same period from Rs. 128 crores to Rs. 466 crores, representing an impressive increase of nearly 264 percent YoY.
Gujarat Mineral Development Corporation Limited, a State Public Undertaking of the Government of Gujarat, is primarily engaged in two sectors: mining and power. The company’s projects include lignite, bauxite, fluorspar, multi-metal, manganese, power, wind and solar.
Written by Shivani Singh
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
The post Stock to Sell: PSU stock that can fall by 55% according to Nuvama appeared first on Trade Brains.