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What’s the theme?
We expect GPIL to record 25% earnings CAGR over FY11-FY13E 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. Further, 0.6 mntpa pellet plant of 75% subsidiary Ardent Steel has also started stabilising with
~40% CU in Q1FY12 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 Ari Dongri
iron ore mine and 0.6mntpa pellet plant, helping revenue growth and margin expansion; 3) Stabilisation of
operations at Ardent Steel to provide 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 earnings estimates are almost in line with the consensus estimates.
What will challenge our target price?
1) Impediments in ramping up 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 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 record 25% earnings CAGR over FY11-FY13E 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. Further, 0.6 mntpa pellet plant of 75% subsidiary Ardent Steel has also started stabilising with
~40% CU in Q1FY12 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 Ari Dongri
iron ore mine and 0.6mntpa pellet plant, helping revenue growth and margin expansion; 3) Stabilisation of
operations at Ardent Steel to provide 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 earnings estimates are almost in line with the consensus estimates.
What will challenge our target price?
1) Impediments in ramping up 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 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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