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What’s the theme?
We expect GPIL to benefit from earnings CAGR of 41% over FY10-FY12E on volume growth and margin
expansion. This would be driven by higher output from Ari Dongri mines, 0.6mntpa pellet plant, and 20MW
biomass power plant that have started giving results from Q3FY11. Further, 0.6 mtpa pellet plant of 75%
subsidiary Ardent Steel's has also started to stabilize and is expected to provide additional earnings
growth Q4FY11 onwards (not factored in our earnings estimates).
What will move the stock?
1) Stabilisation of the newly commissioned 20MW biomass power plant would ensure further power
availability for captive use; sale of surplus power to be revenue accretive. 2) Higher output from Ari Dongri
iron ore mine and 0.6mntpa pellet plant to help in revenue growth and margin expansion. 3) Contribution
from sub. Ardent Steel to the consolidated earnings expected from Q4FY11 onward (not included in our
earnings and TP estimates). 4) Boria Tibu mines, impacted by delay in handover of forest area, are now
expected to commence mining from Q1FY12.
Where are we stacked versus consensus?
Our earnings estimates are below consensus estimates mainly because we have not included Ardent
Steel in our estimates.
What will challenge our target price?
1) Impediments in ramping up of output from the pellet plant (own as well as in sub. Ardent Steel), 20MW
power plant; 2) Continued delay in acquiring forest land in the Boria Tibu mine, and 3) Simultaneous
decline in steel prices and power tariff.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s the theme?
We expect GPIL to benefit from earnings CAGR of 41% over FY10-FY12E on volume growth and margin
expansion. This would be driven by higher output from Ari Dongri mines, 0.6mntpa pellet plant, and 20MW
biomass power plant that have started giving results from Q3FY11. Further, 0.6 mtpa pellet plant of 75%
subsidiary Ardent Steel's has also started to stabilize and is expected to provide additional earnings
growth Q4FY11 onwards (not factored in our earnings estimates).
What will move the stock?
1) Stabilisation of the newly commissioned 20MW biomass power plant would ensure further power
availability for captive use; sale of surplus power to be revenue accretive. 2) Higher output from Ari Dongri
iron ore mine and 0.6mntpa pellet plant to help in revenue growth and margin expansion. 3) Contribution
from sub. Ardent Steel to the consolidated earnings expected from Q4FY11 onward (not included in our
earnings and TP estimates). 4) Boria Tibu mines, impacted by delay in handover of forest area, are now
expected to commence mining from Q1FY12.
Where are we stacked versus consensus?
Our earnings estimates are below consensus estimates mainly because we have not included Ardent
Steel in our estimates.
What will challenge our target price?
1) Impediments in ramping up of output from the pellet plant (own as well as in sub. Ardent Steel), 20MW
power plant; 2) Continued delay in acquiring forest land in the Boria Tibu mine, and 3) Simultaneous
decline in steel prices and power tariff.
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