Pellet prices are now (as of today) at 12500/ton, even after the 60% fall in international iron ore prices.
This dissociation between Indian and International prices have started post the iron ore mining auction change.
Earlier Indian prices were at huge discount to International prices. Now, that discount has reduced to minimal!
from the concall-
“So, you can expect close to about Rs. 100 crore additional EBITDA going
forward from the solar”
“The total EBITDA of Hira Ferro Alloys for the
last quarter was Rs. 47.5”
These two will add additional 150-200 crore EBITDA/year (Hira will be added in current quarter, solar will come next year).
I guess this is an important piece of news.
NMDC is saying domestic demand good enough for prices to remain stable.
Doesn’t intend to reduce prices despite cut in international prices.
If NMDC doesn’t cut prices, then it will keep the prices stable overall.
“Iron Ore Futures Jump on Optimism Over China’s Steel Mills Restocking - Bloomberg” Iron Ore Futures Jump on Optimism Over China’s Steel Mills Restocking - Bloomberg
State-owned mining company NMDC on Tuesday slashed prices of lump ore. NMDC has revised the rates of lump ore or higher grade ore from Rs 5950 to Rs 5,200 a tonne which is down by almost 13% compared to last month.
How does one consume this information?
We know iron ore & finished products like palette prices are not related for the time being, so the drop in iron ore price is a sort of opportunity loss for Godawari Ispat, as Godawari has captive ores & others might be getting them for higher prices, but since prices have lowered, others are getting it cheaper, so their margins would be expanding, so relatively Godwari’s margin would be declining?
But in real terms there is no effect of iron ore price on Godawari, right?
So how does one consume this information?
We have to see what GPIL does with Iron Ore… They are converting Iron ore to pellets. Pellets are used to make spong iron and billets which are finally sold in the market. Lower iron ore price will also reduce the price of final products so GPIL is also going to be affected with that .
Pretty big increase in Billet prices today!
Iron ore another 4% up to 118 USD on SGX today.
Here is the link for live prices.
Stock at 2.5 PE from 3 PE earlier due to selling pressure!
Historically, the debt was very high, there was no capex too. Also, the iron ore mining auction rules changed in 2020. Interest costs were very high earlier, now it will be zero.
Whenever it touched 2 PE in the past- it went up 5-10x in next 1-2 yrs. The stock is 12.5x from March 2020 lows, when it went at 2 PE. So, how is it 12.5x without any buyers???
If stock price goes 5-10x, then everyone will be happy 
Point is, currently there are no big buyers inspite of low valuation.
Disclaimer: I’m invested too.
stock was at lower circuit at Rs. 20 in march 2020. today it is 12.5x and still no buyers. How is it 12.5x without any buyers?
And, isn’t this true based on historical data??
121 USD today. thats a decent upside from 85 USD to 121 USD in a month. and chinese production/demand etc are still at lows.
See, one major reason that they are given so low multiples is because of the volatility of their earnings. Hence, they are valued on the basis of sustainable EBIDTA, rather than the immediate one.
The good thing with GPIL is that they are doing CAPEX which will increase their sustainable EBIDTA. The most recent step that will soon come on stream in the next year is the setting up of the Solar power plant for its subsidiary HFAL and for itself. This according to the last Concall will lead to the addition of 100 crores of EBIDTA. And this is will not fluctuate.
You forgot to add the big increase in earnings driven by 3 factors-
- Increase in iron ore price (as dollar price increases and rupee continues to depreciate)
Though iron ore price increased in the recent past, however overall export volumes are low for this quarter (Source: Steelmint). Not sure how this will get translated to earnings for GPIL (for the current quarter).
this is because domestic price in October was too good. Pellet for oct was at 13400 and Billet 45-46000, the highest ever. They would have made a killing in domestic mkts in October, so why would they export?
