Why GMDC Share Price is Rising

As the war between Israel and the Palestinian militant group Hamas entered the fourth day today, the Sensex recovered Monday's loss to jump 600 points and crossed the 66,000-mark. Meanwhile, the Nifty 50 index crossed the hurdle of 19,660.

Small and midcap stocks, which faced most of the wrath in the previous session, sprung back to life quickly to reverse the losses.

The share price of Gujarat Mineral Development Corporation (GMDC) in particular, soared over 15% to hit a new high of Rs 367.70.

Let's understand what caused this rally.

#1 5X Growth Vision

The recent surge in the company's shares can be attributed to its strategic vision for achieving fivefold growth in the coming decade, underpinned by four key priorities.

First, the Odisha project stands out as a significant driver. GMDC secured two coal blocks with an estimated reserve of over 1,600 million (m) tonnes.

This move not only holds the potential for generating substantial revenue exceeding Rs 50 billion (bn) but also addresses the pressing fuel demands within Gujarat.

The company plans to commission these mines over the next three years, with a projected investment of over Rs 50 bn in the next five to seven years, positioning these projects as the backbone of GMDC's future growth. This substantial growth is expected to quadruple its current net worth of Rs 57.6 bn by 2027-28.

Second, the plan to operationalise five new lignite reserves across Gujarat is another promising avenue. These reserves are anticipated to contribute over Rs 70 bn in revenue, aimed at fulfilling the fuel demand while reducing reliance on imported coal.

Third, the limestone mining project in Kutch, Gujarat, signifies diversification as GMDC aims to enter the cement business through downstream integration. Given Gujarat's deficit in cement supply, this move offers a revenue potential of over Rs 20 bn.

Lastly, its venture into metal mining presents an additional opportunity for revenue growth, with an estimated potential of around Rs 10 bn.

Collectively, these four strategic priorities highlight GMDC's commitment to expansion and diversification.

Investor interest in the stock has driven it to an all-time high on the back of potential for increased revenue and reduced dependence on a single revenue source.

#2 HNIs Show Interest amid New PSU Policy

Gujarat recently unveiled a fresh policy for its Public Sector Undertakings (PSUs), marking a significant development that has garnered enthusiastic attention from the stock market.

This new policy mandates that Gujarat's state-owned PSUs must declare dividends that are either equal to 30% of their post-tax profits or 5% of their net worth, whichever is higher.

It not only ensures a reliable and predictable income stream for shareholders but also underscores the government's commitment to enhancing shareholder value.

This proactive approach has particularly piqued the interest of High-Net-Worth Individuals (HNIs).

Additionally, there are reports that there could be a corporate development in the company soon, so the anticipation has surely built up.

Recently, the company increased its dividend for the financial year 2023 to Rs 11.5 per share from Rs 9.1 per share declared earlier.

What Next?

Looking ahead, GMDC and Hindustan Copper have recently unveiled their plans to venture into rare earth metal mining, primarily focusing on lithium and cobalt.In June, the Gujarat state government appointed retired bureaucrat Hasmukh Adhia as the chairman of GMDC.

GMDC is also committed to expanding its global footprint. The company has already initiated lignite exports to countries like Bangladesh and Nepal and intends to increase its export volumes in the coming years.

the government has also introduced the National Program on Advanced Chemistry Cell (ACC) Battery Storage as part of the Make in India initiative. Under this program, substantial incentives totaling over US$ 2 bn will be granted to electric vehicle (EV) manufacturing companies.

This initiative will strengthen India's position across the entire lithium production cycle while ensuring that the benefits of domestic lithium mining remain within the country.

Consequently, state-owned mining companies like GMDC are poised to reap substantial rewards from these noteworthy developments.

How GMDC Shares have Performed Recently

In the past one month, shares of the company have rallied over 30%.

On a year-to-date basis, GMDC has surged 145% while in the past five days, shares are up 14%.

The company touched its 52-week high of Rs 373.4 on 10 October 2023 and its 52-week low of Rs 122.7 on 28 March 2023.

About GMDC

Gujarat Mineral Development Corporation Ltd (GMDC) is a mining and mineral processing company in India.

The company is the largest merchant seller of Lignite in India. The company produces lignite bauxite calcined bauxite fluorspar and manganese ore. They are also engaged in the generation of power.

The company offers lignite for various industrial units, including textiles, chemicals, ceramics, bricks, and captive power. Lignite mining is the main operation of the company.

GMDC currently has six operational Lignite mines with an annual production capacity of 90 Lakh Tonne per Annum (LTPA).

For more details, see the GMDC company fact sheet and quarterly results.

GMDC has had a stellar run since its March 2020 lows and is up a whopping 12x since March 2020. So, it has gone one step ahead and has ended up being an impressive 12-bagger.

To be honest, the movement in the stock price has caught most investors by surprise. However, is the euphoria justified? Have the valuations run far ahead of fundamentals?

Cohead of Research, Rahul Shah answers this in the below video.

You can compare GMDC with its peers:

GMDC vs NMDC

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