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P o w e r s e g m e n t s u r p r i s e b o o s t s r e s u l t s …
GVK Power (GVK) Q1FY12 results were sharply ahead of our expectation
with the interim availability of RLNG, which led to strong performance in
power division. However, with the discontinuance of RLNG from July
onwards, the power plant PLF is expected to come down in the coming
quarters. We believe the uncertainty over AERA guidelines for airports,
lack of clarity on Hancock deal, delay in the monetisation of real estate
would keep the stock sideway in the near term. However, most of the
negative is already seems to be discounted in the price. Hence, we
maintain our BUY recommendation on the stock with price target of | 32.
ƒ Power division reported strong performance in Q1 FY12
With the availability of RLNG, the PLF for all three power plants
showed marked improvement in Q1 FY12. Consequently, the power
division’s revenues grew 37% sequentially to | 559.3 crore. However,
RLNG has been discontinued from June onwards and the power plants
PLF is expected to come down in the coming quarters. Furthermore,
GVK has in the interim suspended its expansion plans for JP & Gautami
power plants due to lack of gas supply. This may lead to write off | 130
crore in the GVK books (on account of advance given to EPC contract)
and could also lead to increase in PE stake in GVK Energy to ~30%
stake compared to ~25% negotiated at the time of the deal.
ƒ Hiked ~10% toll rate at JKEL from July, 2011 onwards
GVK’s JKEL road project revenues grew 14% yoy to Rs49.9 crore
(volume - +7.5% & higher realisation due to favourable traffic mix -
~7%). Additionally, the toll rate has been also increased by ~10%
from July 01, 2011 onwards, which would further contribute to growth
in the coming quarters. Furthermore, GVK has emerged as H1 bidder
for Shivpuri Dewas Road project worth | 2,815 crore recently. To
funds its equity commitment towards all the road projects (~| 1200
crore), the company is exploring option such as securitisation of JKEL
receivables & private equity deal in transportation division.
V a l u a t i o n
At the CMP, the stock is trading at 0.7x FY12 P/BV. We recommend BUY
rating with SOTP price target of | 32 with a horizon of 24 months.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P o w e r s e g m e n t s u r p r i s e b o o s t s r e s u l t s …
GVK Power (GVK) Q1FY12 results were sharply ahead of our expectation
with the interim availability of RLNG, which led to strong performance in
power division. However, with the discontinuance of RLNG from July
onwards, the power plant PLF is expected to come down in the coming
quarters. We believe the uncertainty over AERA guidelines for airports,
lack of clarity on Hancock deal, delay in the monetisation of real estate
would keep the stock sideway in the near term. However, most of the
negative is already seems to be discounted in the price. Hence, we
maintain our BUY recommendation on the stock with price target of | 32.
ƒ Power division reported strong performance in Q1 FY12
With the availability of RLNG, the PLF for all three power plants
showed marked improvement in Q1 FY12. Consequently, the power
division’s revenues grew 37% sequentially to | 559.3 crore. However,
RLNG has been discontinued from June onwards and the power plants
PLF is expected to come down in the coming quarters. Furthermore,
GVK has in the interim suspended its expansion plans for JP & Gautami
power plants due to lack of gas supply. This may lead to write off | 130
crore in the GVK books (on account of advance given to EPC contract)
and could also lead to increase in PE stake in GVK Energy to ~30%
stake compared to ~25% negotiated at the time of the deal.
ƒ Hiked ~10% toll rate at JKEL from July, 2011 onwards
GVK’s JKEL road project revenues grew 14% yoy to Rs49.9 crore
(volume - +7.5% & higher realisation due to favourable traffic mix -
~7%). Additionally, the toll rate has been also increased by ~10%
from July 01, 2011 onwards, which would further contribute to growth
in the coming quarters. Furthermore, GVK has emerged as H1 bidder
for Shivpuri Dewas Road project worth | 2,815 crore recently. To
funds its equity commitment towards all the road projects (~| 1200
crore), the company is exploring option such as securitisation of JKEL
receivables & private equity deal in transportation division.
V a l u a t i o n
At the CMP, the stock is trading at 0.7x FY12 P/BV. We recommend BUY
rating with SOTP price target of | 32 with a horizon of 24 months.
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