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BUY
CMP Target Price `119 `154
12 months
1QFY2012 494 76 15.4 31 % chg (qoq) (13.2) (30.7) (310)bp (64.7)
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
For 2QFY2012, Godavari Power & Ispat (GPIL) reported robust top-line growth; however, its profitability was hit on account of higher iron ore and coal costs. We maintain our Buy rating on the stock. Higher volumes and realization drive strong top-line growth: During the quarter, GPILs net sales grew by 190.0% yoy to `429cr on account of higher realization and increased sales volume. Pellet, sponge iron, billets and HB wire realizations increased by 51.7%, 30.7%, 23.2% and 25.8% yoy, respectively. Billets, HB wire, ferro alloys, and power sales volumes grew by 108.3%, 30.1%, 24.5% and 21.9% yoy, respectively, during the quarter. Higher input costs mute profit growth: Raw-material cost as a percentage of net sales stood at 65.8% in 2QFY2012 compared to 49.1% in 2QFY2011, as the rise in iron ore and coal prices more than offset the rise in product prices. Thus, EBITDA margin slipped by 828bp yoy to 12.3% in 2QFY2012 and EBITDA grew by 73.2% yoy to `53cr. Interest and depreciation expenses grew by 145.0% and 51.7% yoy to `25cr and `17cr, respectively. Consequently, net profit increased by only 50.0% yoy to `11cr during the quarter. Outlook and valuation: Although GPILs 2QFY2012 profitability was affected by higher iron ore and coal costs, going forward we expect the company to improve its profitability on the back of increased high-margin pellet sales. At the CMP, the stock is trading at 3.7x FY2012E and 3.0x FY2013E EV/EBITDA. On a P/BV basis, it is trading at 0.5x FY2012E and 0.4x FY2013E estimates. We maintain our Buy recommendation on GPIL with a revised target price of `154, valuing it at 3.3x FY2013E EV/EBITDA.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.7 4.6 3.7 28.0
3m 0.8
1yr (16.5)
(24.3) (44.1)
FY2010 822 (24.7) 57 (8.1) 20.5 15.9 5.8 0.6 11.9 10.5 1.0 6.2
FY2011 1,116 35.7 86 50.0 27.1 20.8 4.4 0.6 14.4 13.6 1.0 4.7
FY2012E 1,992 78.5 80 (7.4) 25.0 14.9 4.7 0.5 11.0 13.8 0.5 3.7
FY2013E 2,064 3.6 112 41.5 35.4 16.3 3.3 0.4 13.7 15.2 0.5 3.0
Bhavesh Chauhan
Tel: 022- 39357600 Ext: 6821 bhaveshu.chauhan@angelbroking.com
2QFY2012 429 282 65.8 13 3.1 81 18.8 376 87.7 53 12.3 53 12.3 25 17 3 14 3.3 3 22.5 11 2.5
2QFY2011 148 73 49.1 8 5.1 37 25.2 117 79.4 30 20.6 30 20.6 10 11 9 6.1 2 20.3 7 4.9
yoy % 190.0 288.8 74.4 116.6 220.3 73.2 73.2 145.0 51.7 2,766.7 54.4 71.7 50.0
1QFY012 494 330 66.7 10 2.0 78 15.9 418 84.6 76 15.4 76 15.4 27 16 4 37 7.5 6 16.5 31 6.2
qoq % (13.2) (14.4) 31.1 3.1 (10.0) (30.7) (30.7) (7.6) 4.2 (21.1) (62.0) (48.2) (64.7)
Investment rationale
Mining capacity at Ari Dongri mine to increase
Currently, GPIL has an approval to mine 0.6mn tonnes of iron ore from the Ari Dongri mine. Management aims to increase the mining capacity to 0.9mn tonnes during FY2012. Increased production from captive iron ore mine should further lower costs, given a steep rise in iron ore prices recently.
Angel forecast
25.0 35.4
Bloomberg consensus
31.9 39.4
Variation (%)
(21.5) (10.1)
Bhushan
GPIL
323
119
- Neutral 6,859
154
30
4.1
4.7
4.1
3.3
0.5
0.5
0.5
0.4
8.5
3.7
7.5
3.0
13.8
11.0
12.2
13.7
7.9
13.8
7.4
15.2
Monnet Ispat
SEML
403
114
549
137
Buy
Buy
2,593
408
36
20
8.4
8.6
6.4
7.8
1.1
0.6
0.9
0.5
8.2
6.5
6.0
4.7
13.8
7.0
16.6
7.3
8.7
4.5
11.0
5.3
Key ratios
Y/E March Valuation ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV/Total assets Per share data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book value DuPont analysis EBIT margin Tax retention ratio (%) Asset turnover (x) RoIC (Post-tax) Cost of debt (post tax) Leverage (x) Operating RoE Returns (%) RoCE (Pre-tax) Angel RoIC (pre-tax) RoE Turnover ratios (x) Asset turnover (gross block) Inventory (days) Receivables (days) Payables (days) WC cycle (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest coverage 0.5 12.5 4.5 0.7 24.5 2.7 1.0 37.3 2.9 1.1 31.3 2.4 0.9 24.0 1.8 0.7 18.5 2.1 2.1 115 20 20 61 2.3 60 10 16 53 1.3 109 16 12 71 1.2 164 22 26 78 1.6 114 22 26 64 1.5 114 22 26 72 23.9 28.6 33.1 12.6 16.0 14.7 10.5 14.0 11.9 13.6 16.5 14.4 13.8 15.7 11.0 15.2 17.4 13.7 17.6 87.7 1.5 22.4 9.5 0.5 29.3 8.6 88.1 1.6 11.9 9.7 0.7 13.4 11.7 84.2 0.9 9.1 6.5 1.0 11.7 15.9 83.4 0.9 12.1 8.7 1.1 15.7 11.1 83.0 1.3 12.4 12.0 0.9 12.7 12.5 83.0 1.3 13.9 11.7 0.7 15.5 40.8 35.6 44.9 4.0 146.4 23.1 22.3 32.5 2.5 169.1 21.2 20.5 32.7 2.5 188.7 27.1 27.1 44.5 2.5 214.6 25.0 25.0 48.9 3.0 240.0 35.4 35.4 60.1 3.0 276.2 3.3 2.6 0.8 3.4 0.7 3.1 0.8 5.3 3.6 0.7 2.1 0.6 5.0 0.8 5.8 3.6 0.6 2.1 1.0 6.2 0.8 4.4 2.7 0.6 2.1 1.0 4.7 0.7 4.7 2.4 0.5 2.5 0.5 3.7 0.7 3.3 2.0 0.4 2.5 0.5 3.0 0.6 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Godawari Power No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) :
10