The important thing to note in this industry that 35% of iron ore mining capacity is in Odisha- and significant part of that were auctioned in March 2020 at a 100%+ premium.
Due to such high auction prices, iron ore supply went from excess to shortage in the country.
The industry structure has changed permanently in India post the Mar 2020 auctions in Odisha.
Most of those mines are not even working and many cos like JSW steel are returning the mines to the govt.
As I mentioned in one of the posts above too, the value of GPIL is its license to the mine, which is an intangible asset and not its actual book value which would anyway cross 1000 by end of current FY in 7 months.
6000 pellet price was 10 yrs lows, pre-2020 prices.
Why would anyone take 6000 as base price? Those prices are not coming back because those days of low cost mines have gone permanently. New mines are auctioned at 100% premium because the govt has changed the mining laws with an amendment. Anyone can bid for a mine, and the highest price wins. This was not there earlier.
And, since they are expanding billet, wire rod, sponge capacity, 40-50% sales will come from billets, wire-rod etc, 3-4 months from now, once the expanded capacity is operational.
Billet prices are at 41800 and are very stable, and very much near the highs.
At these billet prices, with expanded capacity, quarterly EPS may touch 120, and annual EPS around 480.
Even 6 PE would give 2800 per share for a debt free company, which is putting up a big specialty steel plant in 3 years.
Even companies with high debt in commodity sector are not trading at 3 PE in Indian markets. Rain industries is a good example.
In addition, one can compare with other mining companies- MOIL, Nalco, HinCu, Vedanta, Coal India or same sector- Shyam metaliks to compare the valuations based on EV/EBITDA or PE basis, and nowhere, will you find such a cheap company.