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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 yielding results from Q3FY11. Further, 0.6mntpa pellet plant of
Ardent Steel (75% subsidiary) has also started to stabilize and it is expected to provide additional earnings
growth (not factored in our earnings estimates).
What will move the stock?
1) Stabilization of the newly commissioned 20MW biomass power plant would ensure further power
availability for captive use; sale of surplus power would be revenue accretive. 2) Higher output from Ari
Dongri iron ore mine and 0.6mntpa pellet plant would aid revenue growth and margin expansion. 3)
Contribution from Ardent Steel to consolidated earnings is 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, 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 Ardent Steel's) and 20MW
power plant; 2) Concerns on foray into 50MW Solar power project; 3) Continued delay in acquiring forest
land in the Boria Tibu mine; and 4) 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 yielding results from Q3FY11. Further, 0.6mntpa pellet plant of
Ardent Steel (75% subsidiary) has also started to stabilize and it is expected to provide additional earnings
growth (not factored in our earnings estimates).
What will move the stock?
1) Stabilization of the newly commissioned 20MW biomass power plant would ensure further power
availability for captive use; sale of surplus power would be revenue accretive. 2) Higher output from Ari
Dongri iron ore mine and 0.6mntpa pellet plant would aid revenue growth and margin expansion. 3)
Contribution from Ardent Steel to consolidated earnings is 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, 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 Ardent Steel's) and 20MW
power plant; 2) Concerns on foray into 50MW Solar power project; 3) Continued delay in acquiring forest
land in the Boria Tibu mine; and 4) Simultaneous decline in steel prices and power tariff.
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