Corporate India | Portfolio Choice

Portfolio Choice

Published: November 15, 2023
Updated: November 15, 2023

NMDC

BSE ticker code	526371
NSE ticker code	NMDC
Major activity	Industrial Minerals
Chairman	Amitava Mukherjee
Equity capital	Rs 293.07 crore; FV Re 1
52 week high/low	Rs 168 / Rs 104
CMP	Rs 160
Market Capitalisation	Rs 46992.26 crore
Recommendation	Buy

Pole player in iron ore

A Navratna PSU unit under the Ministry of Steel, NMDC, the single largest producer of iron ore in the country, operates four iron ore mechanised mines — Bailadila Iron Ore Mines in Kirandul Complex (Dep-14, 14 NMZ, 11B and 11C), Bailadila Iron Ore Mine in Bacheli Complex (Dep-5,10 and 11A) in Chhattisgarh, Donimalai Iron Ore Mine and Kumaraswamy Iron Ore Mine in Karnataka. The company also produces and sells diamonds, sponge iron and wind power.

The company is steadily growing on the financial front, with sales turnover during the last 14 years expanding from Rs 7,564 crore in fiscal 2009 to Rs 17,667 crore in fiscal 2023, operating profit inching up from Rs 5,837 crore to Rs 6,054 crore, and the profit at net level moving up from Rs 4,372 crore to Rs 5,601 crore. What is more, prospects ahead are all the more promising. Consider:

NMDC is considered one of the lowest-cost producers of iron ore globally. It also operates the only mechanized diamond mine in India at Panna, Madhya Pradesh
The company produces about over 40 mtpa of iron ore from its major iron-producing units — Bailadila Sector in Chhattisgarh and Donimalai in the Bellary-Hospet region of Karnataka. NMDC envisages having an iron ore production capacity of 100 mt by FY30.

5-STAR RATING

All of NMDC mining complexes have been rated ‘5 Star’ by the Indian Bureau of Mines, Ministry of Mines, which is a testimony to its scientific and sustainable mining practices.
The company implemented an iron ore price hike in September 2023 with a 6.5%/7.7% increase in iron ore lump/fines price to Rs 4,950/Rs 4,210 per tonne (including Royalty, D2MF, NMET), post the price cut in August 2023. The price hike reflects a rally in the international iron ore price, but the domestic iron ore price is still at a steep discount of 35% to the import parity price versus a historical average of 20%. Thus, there is scope for further hikes in domestic iron ore prices, which bodes well for the margins of NMDC.
NMDC recorded a 19% surge in iron ore production during the April-October period of the current financial year. In October alone, the company’s iron ore production reached 3.92 mt, up from 3.53 mt in the corresponding month last year. In sales volume, it rose to 23.99 mt, indicating a growth of 23.40 per cent from 19.44 mt in the same period a year ago, and was at 3.44 mt in October 2023.
A robust iron ore sales volume and the recent recovery in iron ore prices reinforces confidence with respect to the earnings performance by NMDC. ITs EBITDA/PAT is expected to clock 12%/15% CAGR over FY23-26. A strong earnings growth outlook and higher cash in books (Rs 11,200 crore) would help sustain a high dividend payout of >40% going forward.

CHINA FACTOR

The reopening of China’s economy and capacity expansion by domestic steel companies bodes well for the volume/ earnings growth of NMDC over FY24-25. Moreover, the recent demerger of the steel business will reduce capital intensity
NMDC subsidiary, Legacy Iron Ore Ltd, is set to mine gold in Western Australia. NMDC will commence its mining operation at the Mount Celia gold project located in Western Australia. It will be the first gold mine in its extensive portfolio.

AUSSIE VENTURE

Fresh from approving its first Australian mine, the Indian government-owned NMDC wants to mine lithium in Western Australia within two to five years and ultimately envisages a network of mineral projects in that State to support an expected doubling in the value of India’s economy to $ 7 trillion by 2030. In FY 2024, we expect the company to register sales EPS of Rs 29.1 and give a dividend of Rs 10 per share. As on November 6, 2023 the share price closed at Rs 160. P/E works out to 5.5.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Sales	Net Profit	EPS (Rs.)	Div (%)	BV (%)
2021-22	25881.73	9398.48	32.1	573%	118.9
2022-23	17666.88	5528.63	18.9	660%	76.2
2023-24 (E)	21346	8541.98	29.1	1000%	95.3

LT FOODS

BSE ticker code	532783
NSE ticker code	LTFOODS
Major activity	Other Agricultural Products
Chairman	V K ARORA
Equity capital	Rs 34.73 crore; FV Re 1
52 week high/low	Rs 195 / Rs 90
CMP	Rs 187
Market Capitalisation	Rs 6491.89 crore
Recommendation	Buy

Riding its Basmati USP

LT Foods Ltd (LTFL), a leading Indian-origin global FMCG company in the consumer food space, is a leading player globally in the speciality rice and rice-based foods business for the last 70 years. The company delivers the finest quality and taste experiences in more than 65 countries across India, the US, Europe, the Middle East, the Far East and the Rest of the World.

The company’s flagship brands include ‘Daawat® ’, one of India’s most loved and consumed Basmati brands, ‘Royal’, North America’s No. 1 Basmati player, and many more. The company is proudly expanding into the future food preferences of millennials by offering organic staples through the brand ‘Ecolife’ in global markets and supplying organic agri-ingredients to leading businesses

LT Foods over the last decade has experienced steady compounding growth, both in terms of revenue (12.1% CAGR) and profitability(21.6% CAGR). This growth is expected to continue in the long term, given multiple growth drivers: Consider:

The potential of the export market is enhanced, considering the challenging supply situation which is the fallout of the Ukraine war. Besides, Indian Basmati can gain marketshare in the export market due to the financial crisis prevailing in Pakistan.
There is a huge domestic market opportunity given the gross under-penetration (15% organized share), which is expected to grow to 30% by FY30. LTFL brands ‘Daawat’ and ‘Royal’ have strong brand recall and market acceptance.

BIRYANI KITS

The company’s foray into the packaged snacks industry, which is growing at a healthy 14-16% CAGR. New product introductions like Kari-Kari, Cuppa rice and biryani kits have received an encouraging market response. There are plans for diversification into pulses and non-Basmati rice varieties.
In 2020, SALIC (Saudi Agricultural & Livestock Investment Company) acquired a stake in Daawat Foods Limited (a subsidiary of LT Foods Ltd) through its subsidiary, United Farmers Investment Company, which acquired a 29.81% stake in the India Agri Business Fund (sponsored by Rabobank) and a 0.1% stake of REAL Trust for an amount of $ 17.23 million. This transaction is not expected to impact the shareholding of LT Foods Limited.
The SALIC partnership has been a success for LT Foods in a number of ways. The equity infusion from SALIC will give LT Foods the financial resources to accelerate its organic and inorganic expansion plans across business segments. This will help the company grow its marketshare and reach new customers. It will boost future growth plans in the Middle East and Saudi Arabia region. SALIC is a large Saudi Arabian investment company with a strong presence in the Middle East and Saudi Arabia region. The partnership with SALIC will give LT Foods access to this important market and help the company boost its future growth plans in the region. SALIC is a well-established and experienced investment company with a deep understanding of the food industry. The partnership with SALIC will give LT Foods access to SALIC’s expertise and resources, which will help the company to improve its operations and grow its business.

SAUDI DEAL

The partnership with SALIC will help LT Foods strengthen its position as a leading player in the industry. This will be achieved through the company’s increased marketshare, reach and expertise.
In FY 2024, we expect the company to register sales EPS of Rs 15.8. As on November 6, 2023 the share price closed at Rs 188. The P/E works out to 11.9.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Sales	Net Profit	EPS (Rs.)	Div (%)	BV (%)
2021-22	5427.48	314.14	8.6	100%	32.65
2022-23	6935.81	394.94	10.8	100%	42.45
2023-24 (E)	8005.82	549.81	15.8	100%	57.25

GUJARAT MINERAL DEVELOPMENT CORPORATION

BSE ticker code	532181
NSE ticker code	GMDC
Major activity	Industrial Minerals
Chairman	Hasmukh Adhia
Equity capital	Rs 63.6 crore; FV Rs 2
52 week high/low	Rs 435 / Rs 123
CMP	Rs 316
Market Capitalisation	Rs 10048.8 crore
Recommendation	Buy

Looking beyond lignite mainstay

GMDC (Gujarat Mineral Development Corporation) is a prominent entity in lignite and its leading supplier in India, working dedicatedly to meeting India’s energy requirements and reducing import dependence. Coal is the fuel backbone of Gujarat’s industries, and GMDC through its exploration in Odisha plans to improve Gujarat’s energy securi

Today, GMDC operates 5 lignite mines, located in Kutch, South Gujarat and Bhavnagar, with estimated reserves of 95 million tonnes. In FY 2023, it worked on 6 newly allotted lignite blocks with combined lignite reserves of 360 million tonnes. Today, it caters to nearly 25% of the total demand for minerals in Gujarat, with a diversified customer base.

The company has performed well on the financial front. During the last 12 years, its sales turnover has more than doubled – from Rs 1,627 crore in fiscal 2012 to Rs 3,501 crore in fiscal 2023 — with operating profit inching up from Rs 760 crore to Rs 1,348 crore and net profit almost trebling from Rs 487 crore to Rs 1,216 crore. Only in one year – fiscal 2021 — the company had a serious setback when the operating profit turned negative with a loss of Rs 6 crore and at net level a loss of Rs 36 crore. Prospects going ahead are buoyant.

MAKE-OVER

Having learnt a lesson from the slump of fiscal 2020- 21, GMDC embarked on a major transformative exercise to place itself on a robust growth path. It roped in four leading global management consulting firms -- Boston Consulting Group (BCG), McKinsey, AT Kearney (AK) and Deloitte — to suggest ways and means to achieve production diversity, increase profitability and meet its targeted objectives. BCG was asked to look into the company’s transformation -- from a coal miner to a diverse mineral resources player with an interest in niche as well as volume segments. l Accordingly, the management is busy planning to build on the company’s capabilities in other minerals and metals, including REEs. In associated minerals, GMDC has resources in silica sand fluorspar, multi-metal and limestone which find applications across various industries like electronics, defence, laser and radar systems. At present, lignite accounts for around 90 per cent of the company’s revenues. The objective is to achieve 50 per cent of its revenues from non-lignite segments.
This objective is quite achievable as there are plenty of non-lignite prospects, given that Gujarat’s northern district of Banaskantha has base metal deposits and GMDC holds a mining lease on about 184 hectares in the area. The company is in the process of starting a geological study of the area followed by geophysical mapping and drilling.

RARE EARTH MOVE

GMDC’s entry into rare earth oxide mining may prove a game-changer for the company. According to its estimates, rare earth oxide deposits in the Ambajidonger area of Chota Udaipur in Gujarat are around 3,46,000 tonnes. But in reply to a question in the Lok Sabha on February 2, 2022, the Union government state that as of January 31, 2022, rare earth oxide deposits in the Ambajidonger area are not less than 7,37,283 tonnes - almost double the earlier estimates. The government is pushing for self-reliance in rare earth production and has targeted a three-fold increase in rare earth mining capability by December 2032. The biggest advantage here is the fact that rare earth deposits are contiguous to fluorspar deposits that GMDC is currently mining. Hence, GMDC will have a major role to play in this endeavour.
Another area in which GMDC intends to foray is the mining of fluorspar. The company has some good fluorspar mines in Kadipani.
The operationalisation of the 6 new mines, with total lignite reserves of 360 million tonnes, will add to its capacity in 4-5 years. The company will benefit from higher production, supported by steady demand from manufacturing industries located in Gujarat. In FY 2024, we expect the company to register sales EPS of Rs 33.4 and give a dividend of Rs 9 per share. As on November 16, 2023, the share price closed Rs 385. The P/E works out to 12.17.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Series	Net Profit	EPS (Rs.)	Div (%)	BV (%)
2021-22	2,858.01	404.28	12.7	215%	148.78
2022-23	3,501.45	1,212.48	38.1	572.5%	175.46
2023-24 (E)	3226.14	1008.21	33.4	450%	199.90

February 15, 2025 - First Issue

Subscribe Now

Buy Single Issue

Industry Review

VOL XVI - 10
February 01-15, 2025

Formerly Fortune India Managing Editor Deven Malkan Assistant Editor A.K. Batha President Bhupendra Shah Circulation Executive Warren Sequeira Art Director Prakash S. Acharekar Graphic Designer Madhukar Thakur Investment Analysis CI Research Bureau Anvicon Research DD Research Bureau Manager (Special Projects) Bhagwan Bhosale Editorial Associates New Delhi Ranjana Arora Bureau Chief Kolkata Anirbahn Chawdhory Gujarat Pranav Brahmbhatt Bureau Cheif Mobile: 098251-49108 Bangalore Jaya Padmanabhan Bureau Chief Chennai S Gururajan Bureau Chief (Tamil Nadu) Ludhiana Ajitkumar Vijh Bhubaneshwar Braja Bandhu Behera

Want to Subscribe?

Read Corporate India and add to your Business Intelligence

Unlock Unlimited Access

Select a Plan

Lighter Vein

Portfolio Choice

NMDC

Pole player in iron ore

5-STAR RATING

CHINA FACTOR

AUSSIE VENTURE

LT FOODS

Riding its Basmati USP

BIRYANI KITS

SAUDI DEAL

GUJARAT MINERAL DEVELOPMENT CORPORATION

Looking beyond lignite mainstay

MAKE-OVER

RARE EARTH MOVE

Share Us On

View Over 2000+Companies Scoreboard

E-Waste Dilemma Tackling E-Waste Via Reverse Logistics, By Vihaan Shah

View Over 2000+
Companies Scoreboard