Multibagger PSU metal stock surges 160% this year so far. Edelweiss sees more upside

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In brokerage Edelweiss’ view, mining company Gujarat Mineral Development Corporation (GMDC) is at an advantageous position due to production/realization uptick in the existing lignite business and better prospects of revenue streams in ancillary minerals. 

Going forward, the brokerage sees the narrowed price discount to substitutes to sustain. It has maintained its ‘Buy’ rating on the multibagger stock with a target price of 245 per share. The Gujarat-based PSU metal stock has rallied over 160% in 2022 (year-to-date) so far, whereas, has skyrocketed about 255% in a year.

“In our view, GMDC is heading in the right direction as management is making all reasonable endeavours to: i) strengthen the existing business; ii) sharpen focus on price/volume and align it dynamically to market conditions; and iii) increase emphasis on adjacent businesses—bauxite, bentonite and silica sand. We also anticipate a potential foray into rare earths as yet another value enabler,” the note stated.

The brokerage believes the next few months would be critical for GMDC as BCG and ATK are likely to present their recommendations and findings. Furthermore, lignite prices are likely to stay elevated as management has structurally altered the pricing mechanics and sales process.

The company’s management mentioned that the company’s earnings are likely to be diversified; revenue from the lignite portfolio would be reduced to 50% (currently at 80%). GMDC has appointed BCG to help it in drawing a strategic road map that extends beyond its traditional business and comprehensively covers opportunities in value-added products, Edelweiss highlighted.

The lignite division’s performance has improved progressively in recent quarters led by both volume and realisation. The management has also guided for volume growth of 10–15%/year.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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