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Operational Highlights
For 3QFY2011, GIPCL’s total power generation (excluding the SLPP 3&4 units)
stood at 965MU, down 8.3% yoy. Power generation at the Vadodara station 1 and
2 stood at 239MU and 252MU, respectively. The 250MW SLPP 1&2 units
generated 475MU during the quarter. PLF of the 145MW Vadodara 1 facility fell
substantially by 2,471bp to 74.6% (98.7%), while PLF of the 165MW Vadodara 2
unit declined by 774bp to 69.0% (76.8%). However, PLF of the 250MW SLPP 1&2
rose by 326bp yoy to 89.0% (82.7%) during the quarter.
Gas availability has improved
Currently, 310MW out of the company’s overall capacity is based on natural gas.
Improved availability of gas from KG-D6 has provided more fuel security to the
company.
Assured off-take
A major portion of the power generated by GIPCL is sold to the Gujarat Electricity
Board (GEB). In the last seven years, there has been significant improvement in
GEB’s financial performance, which augurs well for GIPCL going ahead
Outlook and Valuation
In the last few years, there has been significant improvement in GEB’s financial
position. This will benefit GIPCL, as it sells around 80% of its power to GEB, which
is its single largest customer. We expect the company’s top-line and bottom-line to
log CAGR of 22.5% and 20.0% over FY2010-12, respectively. RoE is expected to
improve from 8.8% in FY2010 to 11.2% in FY2012 following commissioning of
new plants. At the CMP of `93, the stock is trading at 1.0x P/BV and EV/MW of
`2.8cr on FY2012E estimates, which we believe is attractive compared to peers.
We maintain a Buy on the stock, with a Target Price of `135.
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GIPCL – 3QFY2011 Result Update
Angel Broking maintains a Buy on GIPCL with a Target Price of Rs. 135.
For 3QFY2011, GIPCL posted a 15.4% yoy decline in net profit to `24cr,
primarily due to higher interest and depreciation costs. On the operating front
too, the company posted low PLF’s owing to low availability of gas and plant
shutdown for maintenance, affecting top-line growth. Going ahead, we expect the
newly commissioned 250MW Surat Lignite Power Plant (SLPP) units 3&4 to record
higher PLF’s, which would result in generation volumes spurting. We maintain a
Buy on the stock.
Top-line up by a moderate 4.6%: Top-line grew 29.1% yoy to `308cr during the
quarter due to higher fuel costs, which is a pass-on. The company lost substantial
generation from SLPP 125MW Unit 3 as it was under repair during the first two
months for rectifying certain faults in the boiler and economizer hopper. The PLF’s
were down on account of low gas availability and plant shutdown, which affected
top-line growth. OPM increased by 138bp yoy to 26.6%. However, bottom-line
declined by 15.4% yoy to `24cr due to higher interest (`26.7cr, up 668% yoy) and
depreciation (`38.8cr, up 76.9% yoy) costs. The interest and depreciation costs
increased due to commissioning of Surat 3&4 units, which have yet to fully
stabilise.
Outlook and Valuation: We expect the company’s top-line and bottom-line to log
CAGR of 22.5% and 20.0% over FY2010-12, respectively. RoE is expected to
improve from 8.8% in FY2010 to 11.2% in FY2012 following commissioning of
the new plants. At the CMP of `93, the stock is trading at 1.0x P/BV and EV/MW
of `2.8cr on FY2012 estimates, which we believe is attractive compared to peers.
We maintain a Buy on the stock, with a Target Price of `135.
Operational Highlights
For 3QFY2011, GIPCL’s total power generation (excluding the SLPP 3&4 units)
stood at 965MU, down 8.3% yoy. Power generation at the Vadodara station 1 and
2 stood at 239MU and 252MU, respectively. The 250MW SLPP 1&2 units
generated 475MU during the quarter. PLF of the 145MW Vadodara 1 facility fell
substantially by 2,471bp to 74.6% (98.7%), while PLF of the 165MW Vadodara 2
unit declined by 774bp to 69.0% (76.8%). However, PLF of the 250MW SLPP 1&2
rose by 326bp yoy to 89.0% (82.7%) during the quarter.
Investment Arguments
Capacity addition to drive growth
The SLPP (125MW*2) units 3&4 were set up at a cost of `1,630cr. Lignite for the
plant will be procured from the company’s captive mines in Surat, developed
exclusively for the project. The units, which were declared commercial during
1QFY2011 are stabilising. This expansion is expected to boost the company’s
profitability and significantly improve cash flows going ahead. Also, post
commissioning of the units, the company’s RoE is also expected to improve
substantially going ahead
Currently, the company is in the midst of examining feasibility of developing a new
600MW lignite-based power plant in Surat. With this, the company intends to
make the best use of the coal mine in its possession, which has adequate lignite to
support 1,000MW of power generation for 35 years.
Gas availability has improved
Currently, 310MW out of the company’s overall capacity is based on natural gas.
Improved availability of gas from KG-D6 has provided more fuel security to the
company.
Assured off-take
A major portion of the power generated by GIPCL is sold to the Gujarat Electricity
Board (GEB). In the last seven years, there has been significant improvement in
GEB’s financial performance, which augurs well for GIPCL going ahead
Outlook and Valuation
In the last few years, there has been significant improvement in GEB’s financial
position. This will benefit GIPCL, as it sells around 80% of its power to GEB, which
is its single largest customer. We expect the company’s top-line and bottom-line to
log CAGR of 22.5% and 20.0% over FY2010-12, respectively. RoE is expected to
improve from 8.8% in FY2010 to 11.2% in FY2012 following commissioning of
new plants. At the CMP of `93, the stock is trading at 1.0x P/BV and EV/MW of
`2.8cr on FY2012E estimates, which we believe is attractive compared to peers.
We maintain a Buy on the stock, with a Target Price of `135.
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