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What’s the theme?
We expect GPIL to benefit from earnings CAGR of 30% over FY11-FY13E on volume growth and margin
expansion. This would be driven by higher output from the Ari Dongri mines, the 0.6mntpa pellet plant,
and the 20MW biomass power plant. Further, 0.6 mntpa pellet plant of 75% subsidiary Ardent Steel also
started stabilizing with 37% CU in Q4FY11 and is expected to provide additional earnings growth.
What will move the stock?
1) Stabilisation of the newly commissioned 20MW biomass power plant; 2) Higher output from the Ari
Dongri iron ore mine and 0.6mntpa pellet plant, helping revenue growth and margin expansion;
3) Stabilisation of operations at Ardent Steel providing additional volume and earnings growth; 4) Mining
commencing at the Boria Tibu, impacted by delay in handover of forest area.
Where are we stacked versus consensus?
Our FY12 EBITDA stands 22% above consensus as we expect improved performance from Ardent Steel.
For Ardent Steel, we assume CU of 60% in FY12E and 70% in FY13E.
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) and
20MW power plant; 2) Negative impact of foray into 50MW Solar power project. GPIL already invested
Rs1.2bn equity (valued at 10% discount to invested capital) and achieved financial closure for debt
requirement of Rs5.8bn for the 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 30% over FY11-FY13E on volume growth and margin
expansion. This would be driven by higher output from the Ari Dongri mines, the 0.6mntpa pellet plant,
and the 20MW biomass power plant. Further, 0.6 mntpa pellet plant of 75% subsidiary Ardent Steel also
started stabilizing with 37% CU in Q4FY11 and is expected to provide additional earnings growth.
What will move the stock?
1) Stabilisation of the newly commissioned 20MW biomass power plant; 2) Higher output from the Ari
Dongri iron ore mine and 0.6mntpa pellet plant, helping revenue growth and margin expansion;
3) Stabilisation of operations at Ardent Steel providing additional volume and earnings growth; 4) Mining
commencing at the Boria Tibu, impacted by delay in handover of forest area.
Where are we stacked versus consensus?
Our FY12 EBITDA stands 22% above consensus as we expect improved performance from Ardent Steel.
For Ardent Steel, we assume CU of 60% in FY12E and 70% in FY13E.
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) and
20MW power plant; 2) Negative impact of foray into 50MW Solar power project. GPIL already invested
Rs1.2bn equity (valued at 10% discount to invested capital) and achieved financial closure for debt
requirement of Rs5.8bn for the 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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