GMDC beats CIL in terms of efficiency, volume growth
and ability to take price hikes. Despite these factors, GMDC is currently trading at
an EV/EBITDA multiple of 3.3x FY2015E, compared to CIL, which is trading at a
multiple of 4.4x, which is unwarranted in our view. GMDC ticks most boxes for a
long-term view: A virtual monopoly with proven ability to increase sales volume
and prices available at an inexpensive valuation. The key catalysts for the stock
are likely to be: 1) lignite price hikes, 2) regulatory approvals for brownfield
expansions, and 3) commencement of production from Umarsar mines. We value
GMDC at an EV/EBITDA of 4.5x FY2015E with a target price of Rs213 and initiate
coverage with a Buy rating.

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