What's Happening?
Brokerage firm Nuvama has maintained its 'reduce' rating on state-run mining company GMDC Ltd., citing concerns over excessive optimism priced into the stock. Nuvama has cut GMDC's EBITDA estimates for
financial years 2026 and 2027 due to lower lignite volume and higher costs. Adjusted for a one-time gain, GMDC reported a net loss in the September quarter, with revenue declining by 11% compared to last year. The thermal power plant is expected to ramp up in the fourth quarter, potentially aiding lignite volume growth.
Why It's Important?
Nuvama's rating reflects skepticism about GMDC's current valuations and future earnings potential. The company's reliance on lignite and coal, coupled with delayed ramp-up of its thermal power plant, poses challenges to its financial performance. As the market anticipates earnings from rare earths post-2030, GMDC's current valuation may be considered elevated, impacting investor sentiment and stock performance.
What's Next?
GMDC is expected to focus on expanding its Bhavnagar mine and ramping up its thermal power plant operations to improve lignite volume growth. The company may also explore opportunities in rare earths, although significant earnings are not anticipated until after 2030. Investors and analysts will closely monitor GMDC's strategic initiatives and financial performance.
