Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Godawari Power & Ispat
|
Strong performance; Buy
|
BUY
CMP: Rs 165 Target Price: Rs 228
n Godawari Power and Ispat (GPIL) posted strong performance for Q3FY11 with topline came at Rs 2285 mn, growing by 13% YoY and 55% QoQ, in line with our expectations
n EBITDA came at Rs 525 mn better than our estimates and posted a growth of 66% and 73% respectively on YoY and QoQ on better realizations and lower costs
n APAT on back of strong EBITDA margin of 23% rose by 56% and 193% on YoY and QoQ respectively. It could have been better without higher interest cost during the quarter
n Our FY11E and FY12E EPS estimates stand at Rs 24.6 and Rs 48 respectively. We assign BUY rating to the stock with a target price of Rs 228/ share
Higher volume and realizations boost topline growth
Strong growth in volume and realizations across the products except ferro alloys has
been the key behind the robust numbers. On a QoQ basis, sales volume grew by 7% in
sponge iron, 115% in billets, 16% in HB wire, 6% in power units and 450% in pellets.
Realizations on the other hand rose by 18% for sponge iron, 3% in billets, 2% in HB
wire, 9% in power and 36% in pellets. On the YoY basis while, HB wire and sponge iron
segment saw sales volume drop of 68% and 22%, billets, ferro alloys, power and pellet
segments saw significant volume jump, as there were no sales of ferro alloys in Q3FY10
due to very low realization and pellet plant came into operation only in Q4FY10. We
believe the company to see further growth in topline both on YoY and QoQ during
Q4Y11 and full FY12 on the back of higher realizations and further ramp up in volume.
The current realizations on per tonne basis for sponge iron, billets, HB wire, ferro alloys
and pellets have been hovering around Rs 19000, Rs 27000, Rs 32000, Rs 55000 and
Rs 7500 respectively.
Pellet plant stabilized, to add more value
After commissioning of the pellet plant in GPIL in Q4FY10, the company had been
facing problems in stabilizing the unit, which finally took place in this quarter. On a QoQ
basis, pellet production jumped by 65% to 103110 tonnes, while sales rose 450% to
18265 tonnes. As per the management, in the month of November, the plant was run at
the full capacity and currently also it has been running satisfactorily. On the other side
the merchant pellet plant in Ardent Steel did not contribute significantly in Q3FY11,
however we believe this would be visible in Q4FY11 numbers, as the plant has been
producing 1000 tpd of pellets currently. We believe the pellet prices would continue to
remain strong in the near medium period and coupled with higher volume it should be
the key performance driver for the company.
Outlook and Valuations
At the CMP of RS 165, the stock is trading at 3.4x its FY12E EPS and 3.9x FY12E EV/
EBITDA. Given the ramping up of its pellet business and strong realizations across the
products we feel the stock has good potential. We value the stock 4.5xFY12EV/
EBITDA to arrive at a target price of Rs 228/ share. We assign BUY rating on the stock.
Power capacity increased to 73 MW, realizations remain muted
During the quarter, the company commissioned 20 MW biomass based power plant that
took the total power capacity of the company to 73 MW. However, due to muted realizations
the utilizations remained low. During the quarter power realizations remained at Rs 2.88/
unit compared to Rs 2.65/ unit and Rs 5.19/ unit realized during Q2FY11 and Q3FY11
respectively. We believe power realizations to remain subdued in the near term. However,
as the company has flexible model, it would continue to produce more billets and ferro
alloys, as long as it earns better margins in those segments due to robust realizations.
Earning estimates; Buy
Though, there are concerns on not getting approval for its coal mine and also for Boria Tibu
iron mine, we believe the company to maintain its pellets production at steady rate going
forward. Ardent steel’s contribution would also be visible from next quarter onwards. On the
back of strong realizations and higher volume across all the products except power we
remain positive on the stock. Our FY11E and FY12E EPS estimates stand at Rs 24.6 and
Rs 48 respectively.
Valuation
At the CMP of RS 165, the stock is trading at 3.4x its FY12E EPS and 3.9x FY12E EV/
EBITDA. Given the ramping up of its pellet business and strong realizations across the
products we feel the stock has good potential. However, considering debt burden on the
company (with long term debt of Rs 4.7 bn at the end of Q3FY11), we value the stock at
4.5xFY12 EV/ EBITDA to arrive at a target price of Rs 228/ share, providing an upside of
38%. We assign BUY rating on the stock.
Higher volume and realizations boost topline growth
Strong growth in volume and realizations across the products except ferro alloys has
been the key behind the robust numbers. On a QoQ basis, sales volume grew by 7% in
sponge iron, 115% in billets, 16% in HB wire, 6% in power units and 450% in pellets.
Realizations on the other hand rose by 18% for sponge iron, 3% in billets, 2% in HB
wire, 9% in power and 36% in pellets. On the YoY basis while, HB wire and sponge iron
segment saw sales volume drop of 68% and 22%, billets, ferro alloys, power and pellet
segments saw significant volume jump, as there were no sales of ferro alloys in Q3FY10
due to very low realization and pellet plant came into operation only in Q4FY10. We
believe the company to see further growth in topline both on YoY and QoQ during
Q4Y11 and full FY12 on the back of higher realizations and further ramp up in volume.
The current realizations on per tonne basis for sponge iron, billets, HB wire, ferro alloys
and pellets have been hovering around Rs 19000, Rs 27000, Rs 32000, Rs 55000 and
Rs 7500 respectively.
Pellet plant stabilized, to add more value
After commissioning of the pellet plant in GPIL in Q4FY10, the company had been
facing problems in stabilizing the unit, which finally took place in this quarter. On a QoQ
basis, pellet production jumped by 65% to 103110 tonnes, while sales rose 450% to
18265 tonnes. As per the management, in the month of November, the plant was run at
the full capacity and currently also it has been running satisfactorily. On the other side
the merchant pellet plant in Ardent Steel did not contribute significantly in Q3FY11,
however we believe this would be visible in Q4FY11 numbers, as the plant has been
producing 1000 tpd of pellets currently. We believe the pellet prices would continue to
remain strong in the near medium period and coupled with higher volume it should be
the key performance driver for the company.
Outlook and Valuations
At the CMP of RS 165, the stock is trading at 3.4x its FY12E EPS and 3.9x FY12E EV/
EBITDA. Given the ramping up of its pellet business and strong realizations across the
products we feel the stock has good potential. We value the stock 4.5xFY12EV/
EBITDA to arrive at a target price of Rs 228/ share. We assign BUY rating on the stock.
Power capacity increased to 73 MW, realizations remain muted
During the quarter, the company commissioned 20 MW biomass based power plant that
took the total power capacity of the company to 73 MW. However, due to muted realizations
the utilizations remained low. During the quarter power realizations remained at Rs 2.88/
unit compared to Rs 2.65/ unit and Rs 5.19/ unit realized during Q2FY11 and Q3FY11
respectively. We believe power realizations to remain subdued in the near term. However,
as the company has flexible model, it would continue to produce more billets and ferro
alloys, as long as it earns better margins in those segments due to robust realizations.
Earning estimates; Buy
Though, there are concerns on not getting approval for its coal mine and also for Boria Tibu
iron mine, we believe the company to maintain its pellets production at steady rate going
forward. Ardent steel’s contribution would also be visible from next quarter onwards. On the
back of strong realizations and higher volume across all the products except power we
remain positive on the stock. Our FY11E and FY12E EPS estimates stand at Rs 24.6 and
Rs 48 respectively.
Valuation
At the CMP of RS 165, the stock is trading at 3.4x its FY12E EPS and 3.9x FY12E EV/
EBITDA. Given the ramping up of its pellet business and strong realizations across the
products we feel the stock has good potential. However, considering debt burden on the
company (with long term debt of Rs 4.7 bn at the end of Q3FY11), we value the stock at
4.5xFY12 EV/ EBITDA to arrive at a target price of Rs 228/ share, providing an upside of
38%. We assign BUY rating on the stock.
No comments:
Post a Comment