GMDC - A VALUE BUY CUM BONUS...... 1:1

Gujarat Mineral Development Corporation (GMDC) net sales were in line with expectations as they rose by 70% YoY to Rs3.2bn driven by higher volumes and realisations. However, OPM shrank by 1,000bps to 52.6% as a result of higher extraction costs. The CMP of 256 discounts FY10E EPS of Rs19.9 by 14.8x and trades at an EV/EBIDTA of 8.7x. Being a monopoly player in the lignite sector, GMDC should capitalise on the buoyant demand for the same despite the delays in achieving scale in new mines. In light of the above, I maintain a buy/hold recommendation. Immediate upside triggers to my recommendation would be an increase in lignite volumes and possible price hikes.