PSU Stocks: Brokerage firm Nuvama has expressed a big apprehension regarding the mining sector company GMDC (Gujarat Mineral Development Corporation). The brokerage says that the shares of this company owned by the Gujarat government may fall by about 59 percent from the current level. Nuvama has maintained its “Reduce” rating on GMDC shares and set its target price at Rs 231. This target predicts a decline of about 59% from Monday’s closing price.
Nuvama has cut GMDC’s FY26 and FY27 operating profit (EBITDA) estimates by 10% and 15%, respectively. According to the brokerage, low lignite volumes and rising costs are having a huge impact on the company’s margins. The brokerage also noted that if one-time gains were excluded, the company would have reported a net loss in the September quarter.
There was an 11 percent decline in GMDC’s revenue on an annual basis in the September quarter. The company’s operating profit (EBITDA) was halved. At the same time, EBITDA margin declined from 24% to 13.2%. These figures show that there is serious pressure on the company’s operating performance.
The brokerage said GMDC’s new thermal power plant is scheduled to become operational in the September quarter. But its full impact on the company’s volume growth will be visible from the March quarter only. Lignite volumes are expected to grow by 26% in FY27, and the expansion of the Bhavnagar mine will play a key role in this.
Hope on rare earth magnets but no quick profit
GMDC shares were in the news recently due to its increasing focus on rare earth materials. However, the brokerage says that GMDC will get earnings from rare earths business only after financial year 2023. This means that there is no possibility of any rapid growth from this segment in the near future.
According to Nuvama, it has already included the potential benefits of lignite, coal and power in its estimates. GMDC currently trades at 19x its FY2027 EV/EBITDA and 15x its FY2028 EV/EBITDA. The brokerage says these valuation levels are excessive and inappropriate, especially when the company’s fundamentals are weak.
It is also important to mention here that Nuvama is currently the only brokerage firm covering GMDC shares.
Shares of GMDC closed nearly 4% lower at Rs 541.55 at the end of trading on Tuesday. So far in the year 2025, this share has come down by about 21%.
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