Sandur Manganese, another iron ore mining company has been on a tear ever since it announced getting the approval for capacity enhancement, something that was already on the cards & it was more a matter of “when” & not 'if". Todays announcement of a liberal bonus issue of 5:1 has further added fuel to the stock rally. I am decently invested in Sandur as well & am delighted with the way the stock has behaved in the last month or so. Also, I continue to hold my full quantity.
The purpose of this particular post however is to put forward the view that the valuation differential between Godawari & Sandur has become glaring & there does not seem to be any justification for this. In fact, Sandur aspires to be in five years where Godawari Power is today! Sandur is still in the process of forward integrating from ore into value added products where as Godawari has already done so & is not selling any iron ore. Godawari is much bigger in terms of scale & is in the process of more than doubling its capacity from 2.35 MnT to 6 MnT. As per the mgt commentary, this permission is expected by March '24 & the increased capacity should go on stream in about 15 months. Despite more than doubling its mining capacity, Godawari is not planning to sell any iron ore & is confident of simultaneously increasing its palletization capacity.
To me the Company seems to be a mis-priced bet, more so, admittedly, after the recent run up in Sandur. I repeat, that Sandur is a wonderful mining Co. with a history of great corporate governance & its valuations are well earned. My limited point is that both Co.'s own iron ore mines, which clearly is their biggest strength & despite being a bigger Co. & a more efficient user of capital, Godawari’s valuations leave a lot of scope for improvement.
A comparison of the two companies is given below:
Peer comparison
Godawari Power & Ispat Ltd | Sandur Manganese & Iron Ores Ltd | |
---|---|---|
Market Cap | 9,669 | 6,871 |
Current Price | 710 | 2,545 |
High / Low | ₹ 726 / 307 | ₹ 2,546 / 695 |
Stock P/E | 12.4 | 24.4 |
Book Value | 297 | 735 |
Dividend Yield | 0.56 | 0.20 |
ROCE | 27.5 | 18.4 |
ROE | 22.3 | 14.7 |
Face Value | 5.00 | 10.0 |
Debt to equity | 0.02 | 0.07 |
Disc: Invested decently in Godawari Power!!
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