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HomeMarket News'Reduce' for 59% downside: Nuvama says 'too much optimism' priced in to this mining stock
Adjusted for a one-time gain, GMDC would have reported a net loss in the September quarter. Its revenue also declined by 11% during the quarter compared to last year, while its EBITDA halved. EBITDA margin narrowed to 13.2% from 24% in the year-ago quarter.
Brokerage firm Nuvama has maintained its "reduce" rating on state-run mining company GMDC Ltd. for a price target of ₹231 in its latest note. The price target implies a potential downside of 59% from Monday's closing levels.
Nuvama has cut GMDC's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimates for financial year 2026 and 2027 by 10% and 15% respectively to factor in lower lignite volume and higher cost.
Adjusted for a one-time gain, GMDC would have reported a net loss in the September quarter. Its revenue also declined by 11% during the quarter compared to last year, while its EBITDA halved. EBITDA margin narrowed to 13.2% from 24% in the year-ago quarter.
The thermal power plant which became operational during the September quarter is only likely to ramp-up in the fourth quarter of the current financial year and as a result, lignite volume growth of 26% in financial year 2027 is likely for GMDC and this will also be aided by an expansion of the Bhavnagar mine.
Nuvama believes that any potential earnings that come from rare earths will only be possible after financial year 2030. "We have factored in all the benefits of lignite, coal and power in our estimates," Nuvama said, adding that GMDC's current valuations of 19 times and 15 times its estimated Enterprise Value to EBITDA for financial year 2027 and 2028, is "elevated."
The brokerage is the only one that has coverage on GMDC.
Shares of GMDC are trading 4% lower on Tuesday at ₹541.55. The stock is still down 21% so far in 2025.
