Godawari Power & Ispat Ltd. (GPIL)|Q2FY15 First Cut Analysis | Inline estimate; Maintain buy with target price of Rs. 198 :: India Nivesh

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In line at operational level; tax write back boosts PAT Godawari Power & Ispat:: Centrum

In line at operational level; tax write back boosts PAT
Godawari Power & Ispat’s (GPIL) operational performance was
largely on expected lines with EBITDA at Rs768mn and margin of
12.3% (above our estimate of Rs758mn). Iron ore production
improved by 12.5% QoQ and stood at ~6.9lakh tonne for FY13.
Sponge iron sales at ~49kt (up ~25% YoY) surprised positively.
Realizations remained lower by 2-6% QoQ across steel products due
to low end user demand and that could have prompted GPIL to sell
more of sponge iron and power. PAT was higher on account of tax
write back on power operations earnings for the last few years
(which were exempted under AITA). We expect growth in pellet
volumes through 1.2mtpa expansion (which is ahead of schedule) to
provide support to operating profits and margins. We revise our
realization estimates lower and reduce our earnings estimates for
FY14E/15E by 10.2%/8%. Maintain Buy.
 Volumes increase in sponge and power, as steel realizations weaken further: Iron
ore production went up by ~12% QoQ to reach 1.6 lakh tonne and sponge iron sales
jumped by ~25% YoY to 48.9kt. Billet sales were lower by ~5.5% QoQ and HB wire
sales also dropped by ~12% QoQ as steel product realizations continued to fall amidst
weak demand and were lower QoQ by 2-6% across product categories. Power sales
continued to be strong at 20.1mn units (up ~49% YoY).
 EBITDA largely in line: EBITDA at Rs768mn was higher QoQ by 9.8% and marginally
higher than our estimate of Rs758mn. Due to pressure on realizations across products
and higher share of low margin sponge iron sales, EBITDA margin stood at 12.3%
(lower by 250bps YoY and up 70bps QoQ).

Well above expectations, maintain buy Godawari Power :: Centrum

Well above expectations, maintain buy
Godawari Power & Ispat (GPIL) reported much better operational performance than our
expectations with net sales at ~Rs6bn, up by ~39% YoY on account of higher iron ore
mining output (up ~102% YoY) leading to higher sales volumes in pellets (up 61% YoY
at Chhattisgarh), billets (up 54% YoY) and HB wires (up ~42% YoY). Realizations
remained lower by 4-6% QoQ across products and EBITDA stood at Rs746mn (margin of
~12.5%, up by 20bps YoY). PAT jumped 100% YoY to reach Rs213mn. We were
impressed with GPIL’s strong volumes from pellet plants and captive iron ore mines for
third successive quarter and also higher overall steel output in an otherwise seasonally
weak Q2. We expect GPIL to maintain its strong operational performance in H2 with
pick up in iron ore mining output and revise our volume and earnings estimates
upwards marginally for FY13E/14E. Maintain Buy.
Volumes remain strong in seasonally weak quarter: GPIL showed strong volume in a
seasonally weak quarter on the back of operational improvements, higher mining
output during H1 and flexible product mix advantage. Iron ore production went up by
~102% YoY to reach 1.3 lakh tonne. Chhattisgarh pellet plant maintained its strong
operational performance and utilization was above 100%. Pellet sales volume went up
61% YoY as GPIL went for lower sponge iron production to benefit from higher pellet
sales which have higher margin. Billet sales increased on the back of higher production
and HB wire sales remained strong. Power sales were also higher QoQ at 16.6mn units.
Realizations showed a drop of 4-6% QoQ as steel prices weakened in the domestic
markets after the global price fall.
EBITDA improves impressively; margin weakens on account of seasonality and
price fall: Riding on higher iron ore and pellet production, EBITDA went up by 41.7%
YoY to Rs746mn. Margin stood at 12.5%, a drop of 570bps QoQ on account of lower
realizations and lower overall mining volumes during the monsoon quarter.

Godawari Power & Ispat :Operational strength showcased again:Centrum

Operational strength showcased again
Godawari Power & Ispat (GPIL) reported much better operational performance than our
expectations with net sales at ~Rs6bn, up by ~22% YoY on account of smart use of its
flexible product mix to achieve higher sales volumes in pellets (up by 73% QoQ at
Chhattisgarh and ~15% QoQ at Orissa). Realizations remained robust across products
and EBITDA stood at Rs1096mn (margin of ~18.2%, up by 340 bps QoQ), led by higher
captive iron ore production of 2.6 lakh tonne. PAT jumped 55% YoY and ~42% QoQ to
reach Rs467mn. We were impressed with GPIL’s strong volumes from pellet plants and
captive iron ore mines for second successive quarter and also it’s intentional build up of
iron ore inventory through higher production in Q1FY13 for the lean season of
monsoons in Q2FY13E. We expect GPIL to maintain its strong operational performance
going forward and revise our volume and earnings estimates upwards for FY13E/14E.
We revise our target price upwards to Rs183 and maintain Buy.
Volumes remain strong, pellet sales jump: GPIL showed strong volume growth QoQ
on the back of operational improvements and flexible product mix advantage. Iron ore
production went up by ~43% QoQ and 243% YoY to reach 2.6 lakh tonne. Chhattisgarh
pellet plant maintained its strong operational performance and utilization was
maintained at ~110% for the second successive quarter. Pellet sales volume went up
QoQ by ~73% as GPIL went for lower sponge iron production in order to benefit from
higher pellet sales which have higher margin. Billet sales increased on the back of
higher production and HB wire sales remained strong. Power sales were flat QoQ due to
higher captive use by GPIL for making steel products. Realizations remained strong
across products with pellet realizations at ~Rs9600/tonne. Pellet volumes from GPIL’s
Orissa subsidiary were robust at 1.2 lakh tonne, up ~15% QoQ.
EBITDA margin improves impressively: Riding on higher iron ore and pellet
production, GPIL improved its EBITDA margin to 18.2%, up 340 bps QoQ. EBITDA went
up by 12.7% QoQ to Rs1096mn mainly on account of higher pellet volumes and strong
realizations across products.

Godawari Power and Ispat: Buy : Business Line

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Godawari Power & Ispat Ltd Buy Target Price: Rs157 ::Centrum

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Godawari Power & Ispat Ltd

Buy

Target Price: Rs157

CMP: Rs100

Upside: 57%

Pellet paving the way for a prosperous future

A backward integrated business comprising captive iron ore mines and a flexible sales product mix of steel, pellets and power make Godawari Power & Ispat Ltd, GPIL, an interesting investment bet in the midcap steel space. Ramp up in captive iron ore mining and pellet production together with increased steel product sales is likely to result in impressive net sales and EBITDA CAGR of ~23% and ~15% respectively over FY11-14E. We initiate coverage on the stock with a Buy rating and target price of Rs157.

m  Flexible business model with rich product portfolio: GPIL has created a strong niche for itself in the midcap steel space through its rich product portfolio forward integrated into HB Wire and backed by backward integration from iron ore and pellets.  The product mix of GPIL remains flexible to derive maximum profitability.

m  Pellet making to double in two years, drive earnings: GPIL is doubling its pellet making capacity to 2.4 mtpa by FY14E through the set up of a new pellet plant of 1.2 mtpa at Chhattisgarh at a capex of Rs3.8bn. Pellets result in cost saving on iron ore feed for sponge iron unit and enjoy EBITDA margin of ~40% on spot merchant sales when captive fines are used. We see merchant pellet sales growing at a CAGR of 21% during FY12-14E and account for ~65% of overall pellet production by FY14E thus driving the earnings of GPIL.

m  Captive iron ore back on track: GPIL’s Ari Dongri iron ore mine of 0.6 mtpa results in crucial cost savings for pellet and sponge iron making and is back on track after facing problems on mining and logistics in H1FY12E. We see 80% capacity utilization in iron ore mining for GPIL in FY13-14E.

m  Power provides hedge to steel business volatility: GPIL’s 53 MW power portfolio provides a natural hedge for steel business volatility and we expect the company to continue selling a mix of steel and merchant power to maximize returns.

m  Solar power foray remains an unrelated diversification: We remain concerned on GPIL’s foray into solar power generation (50 MW capacity at a capex of ~Rs8bn with 70:30 debt: equity) and view it as an unrelated diversification. GPIL has thus far invested Rs1210mn as equity into the project and the project is expected to commission by May’2013. We have not factored the same in our earnings and valuation as of now and await more clarity on the same.

m  Valuations – attractive, Buy: The stock trades at Rs100, which discounts its FY13E EPS and EV/EBITDA by 3.2x and 4.1x. We see earnings growth ahead driven by pellet volumes and value the stock at 4x FY14E EV/EBITDA to arrive at a fair value of Rs157. We don’t factor in any value for the solar power investment by the company as of now. We initiate coverage on GPIL with a Buy rating and target price of Rs 157.

m  Key Risks: Lower sales volumes, drop in steel and pellet prices, hike in royalty on iron ore and lower returns from investment into solar power.

Thanks & Regards, 

Godawari Power and Ispat: Lower Captive Iron Ore Output Contracted Margins: • ULJK

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Lower Captive Iron Ore Output Contracted Margins:
• Godawari reported stable sequential performance with a PAT of `106 million or EPS of
`3.35 in Q3 FY12. Its net sales grew ~12.2% q-o-q to `4,810 million on the back of
improvement in sales volume and better realizations. Net revenues also benefited from
substantial increase in revenues from trading activity at Hira Ferro Alloy, a 51% subsidiary.
Q3 FY12 results are not comparable on Y-o-Y basis due to completion of corporate
restructuring in FY12.
• Despite robust topline growth Godawari’s Q3 FY12 EBITDA grew only 6.4% to `560
million (margin contracted 63 bps sequentially) due to lower captive iron ore consumption,
which was down ~58% due to extended delay in negotiation of transportation
contract.
• Moderation in EBITDA margin coupled with increase in interest burden and higher minority
interest in net income resulted in flat sequential earnings in Q3 FY12.
• Godawari has not created any provision for MTM losses of `257 million relating to its
foreign currency loans due to volatile currency market. The company plans to make
provision relating to the same at the time of year end.

BUY Godawari Power and Ispat Investment Rationale :: ULJK

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Godawari Power and Ispat
Investment Rationale
Higher Capacity Utilization at Merchant Pellet Plant to Drive Near Term Earnings:
Ardent Steel, a 75% Subsidiary of Godawari Power, operates 0.6 mtpa merchant
pellet plant in Orissa. The plant sources inexpensive iron ore fines from the local market
and converts them into high value pellets for merchant sale. The plant use to operate at
half of the stated capacity till November 2011 due to technical difficulties. It has however
stabilised, having achieved ~100% capacity utilization in December 2011. Accordingly,
we expect higher pellet output and moderation in conversion cost, which would drive
segment’s near term earnings.
Commencement of Mining At Boria Tibu to Expand Margins: Godawari Power
operates 0.6 mtpa Ari Dongri ore mine, meeting ~68% of its captive ore requirement at
66% and 100% capacity utilization of its sponge iron and pellet plants respectively. This
mine contains ~7 million tons of mineral resources, indicating mine life of ~12 years at
current production rate. The company also owns Boria Tibu iron ore mine, which contains
~8 million tons of mineral resources and also has all the approvals for mining 0.6
mtpa of ore. Despite having all approvals, mining at Boria Tibu has not begun as the
company is still awaiting handing over of the mine by the forest department. Once Boria
Tibu commences mining operations, the company is expected to source 100% of iron ore
requirement from captive mines namely Ari Dongri & Boria Tibu mines.
Downward Revision in FY12 Earnings: Godawari is facing delays in negotiating
transportation contracts for captive iron ore. Though the management is confident of
closing the contract in early Q4 FY12, we have assumed a further delay of 3-6 months.
Accordingly, we lower our FY12 earnings estimates to `19.3 compared to our previous
estimate of `25. However, we maintain our FY13 earnings estimate at ~`32.
Key Near Term Catalysts: We believe GPIL’s improving operating performance (which
would translate into higher profitability), full year contribution from Ardent steel, commencement
of operations of Boria Tibu mine and favorable outcome on coal mine
(Chhattisgarh Captive Coal Mining Ltd) will be key near term catalysts for the stock.
Outlook & Valuation: We expect Godawari Power to report ~37% CAGR top line
growth between FY11-13E on account of higher capacity utilization of pellet plant, better
realizations and improvement in steel demand. However, its EBITDA margins are expected
to decline due to increasing exposure to high cost e-auction/imported coal.
Based on current weak market conditions, we lower our FY13 EV/EBITDA multiple on the
stock from 4.5x to 4.0x. Accordingly, we reduce our 12 month price target `146 but
maintain our BUY rating due to attractive valuation.

Buy Godawari Power & Ispat : 2QFY2012 Result Update: Angel Broking,

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For 2QFY2012, Godavari Power & Ispat (GPIL) reported robust top-line growth;
however, its profitability was hit on account of higher iron ore and coal costs.
We maintain our Buy rating on the stock.
Higher volumes and realization drive strong top-line growth: During the quarter,
GPIL’s net sales grew by 190.0% yoy to `429cr on account of higher realization
and increased sales volume. Pellet, sponge iron, billets and HB wire realizations
increased by 51.7%, 30.7%, 23.2% and 25.8% yoy, respectively. Billets, HB wire,
ferro alloys, and power sales volumes grew by 108.3%, 30.1%, 24.5% and 21.9%
yoy, respectively, during the quarter.
Higher input costs mute profit growth: Raw-material cost as a percentage of net
sales stood at 65.8% in 2QFY2012 compared to 49.1% in 2QFY2011, as the rise
in iron ore and coal prices more than offset the rise in product prices. Thus,
EBITDA margin slipped by 828bp yoy to 12.3% in 2QFY2012 and EBITDA grew
by 73.2% yoy to `53cr. Interest and depreciation expenses grew by 145.0% and
51.7% yoy to `25cr and `17cr, respectively. Consequently, net profit increased by
only 50.0% yoy to `11cr during the quarter.
Outlook and valuation: Although GPIL’s 2QFY2012 profitability was affected by
higher iron ore and coal costs, going forward we expect the company to improve
its profitability on the back of increased high-margin pellet sales. At the CMP, the
stock is trading at 3.7x FY2012E and 3.0x FY2013E EV/EBITDA. On a P/BV basis,
it is trading at 0.5x FY2012E and 0.4x FY2013E estimates. We maintain our Buy
recommendation on GPIL with a revised target price of `154, valuing it at 3.3x
FY2013E EV/EBITDA.

Godawari Power & Ispat Steady performance BUY::Emkay

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Godawari Power & Ispat

Steady performance

BUY

CMP: Rs 119                                       Target Price: Rs 193

---

n     Performance remained in line with our estimates; consolidated revenues at Rs 4.3 bn was down 13% QoQ. YoY figures not comparable due to mergers during Q4FY11

n     Consolidated EBITDA at Rs 526 mn was down 31% QoQ. EBITDA margin also contracted 309 bps QoQ to 12.3% due to higher employee costs and other expenses

n     Lower interest costs on QoQ basis aided PAT to remain at Rs 106 mn, in line with our estimates; MTM forex loss of Rs 120 mn was not adjusted in the P&L accounts

n     Stable performance likely to continue, however, factoring in higher costs and slowing demand we revise our EPS for FY12 and FY13. Maintain Buy with a revised target price of Rs 193  

GODAWARI POWER: BUY, TP-Rs206 (31% upside)::PINC Power Picks August 2011

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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.

BUY Godawari Power & Ispat - Good show; fixed costs to be a concern ::Emkay

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Godawari Power & Ispat

Good show; fixed costs to be a concern

BUY

CMP: Rs151                                        Target Price: Rs210

---

n     Results ahead of our estimates; Standalone topline at Rs 4.2 bn, up 28% QoQ, Consolidated revenues stand at Rs 4.94 bn, down 9% QoQ. YoY figures not comparable due to mergers 

n     Absolute EBITDA (cons) remain higher than estimates at Rs 759 mn, down 33% QoQ. EBITDA margin also contracted 549 bps QoQ to 15.4% 

n     Sequential fall in depreciation, interest costs and tax expenses helped the company to post APAT of Rs 310 mn, down 32% QoQ

n     Operational performance to be challenged by higher fixed costs; Cutting FY12E and FY13E EPS to Rs 35.1 and Rs 41.7 respectively; Valuation still cheap, maintain Buy 

Godawari Power & Ispat: Buy:: Business Line,

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The shares of iron ore pellet and sponge iron producer, Godawari Power and Ispat, appear an attractive buy at current prices. The company's growth potential seems strong, thanks to its increased output from iron ore mines and improving utilisation rates at its pellet plants. The share trades at Rs 147, which is around 5.2 times the FY-11 earnings, a discount to larger peers in the steel industry, which trade at around 7-12 times earnings.

Rising Capacity Utilisation

Godawari Power and Ispat broadly operates in two segments — steel and power. Steel accounted for over 90 per cent of revenues in FY 2010-11 and two-thirds of operating profits. Growing sales in the segment, which produces iron ore pellets, sponge iron and steel wire rods have driven consolidated sales and profits over the last fiscal.

Sales in 2010-11 grew by 36 per cent year-on-year to Rs 1,100 crore, while profits grew by 50 per cent to around Rs 86 crore. This was a result of higher capacity utilisation and realisations across its product mix. Also chipping in were two bought-out entities which comprised of a ferro-alloy production unit, 20 MW of power and an iron ore crushing facility.

The company operates one iron ore mine in Chhattisgarh and is in the process of commissioning another by the end of the current fiscal. Its standalone pellet plant, which commenced operations in early 2010, has production capacity of 600,000 tonnes per annum.

Though it operated at just over 50 per cent utilisation levels in FY-11 due to stabilisation processes, the plant has been operating at near-full capacity in recent times. The company has 75 per cent stake in another pellet plant with identical capacity. This plant has been slow to take off, but is expected to attain 70-80 per cent utilisation rates over the next two fiscals.

With a consolidated capacity to produce 1.2 million tonnes of pellets and close proximity to iron ore rich belt in Chhattisgarh, Godawari Power and Ispat is well poised to emerge as a low cost producer of iron ore pellets.

GROWTH DRIVERS

The ramped up pellet output is expected to be the key driver of sales and profits over the next two fiscals. The company's pellet production stood at around 350,000 tonnes per annum in 2010-11. With 850,000 tonnes of slack capacity, the company is in a good position to cater to the growing steel market. The first five months of the year saw steel production rise by 4 per cent.

With Tata Steel, Essar Steel, JSW Steel, and SAIL, among others, set to commission substantial capacity over the next two years, demand for iron ore is set to grow in double-digits. The quarter ended March 2011 saw the company's sales and net profits grow by 40 per cent each over the previous year as a result of increased mine and pellet output.

A major competitive advantage for the company is its partly integrated structure. Saving on purchase of iron ore and generating power using captive plants is cost advantageous to the company. Its captive power capacity (around 73 MW) accounted for around 10 per cent of sales in 2010-11 and roughly a third of operating profits. However, with softening merchant power tariffs, it is currently being used mostly for internal purposes.

The company EBIDTA margins have hovered around 12-21 per cent over the last three fiscals, with FY-11 registering margins of 21 per cent. The company's debt equity at the end of FY11 stood at a reasonable 1.2 times while its interest cost was covered by EBIT 2.5 times over.

Quality iron ore remains in short supply in domestic markets and mine additions have been few in recent years. Godawari Power and Ispat, with scope to ramp up utilisation at its pellet production capacity and low raw material procurement cost due to vicinity to the iron ore belt could translate into a winner for investors

GODAWARI POWER: BUY, TP-Rs278 (70% upside):: PINC Power Picks July 2011

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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.

Buy Godawari Power & Ispat -Pellet plant stabilizing: Motilal Oswal

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Godawari Power & Ispat -Pellet plant stabilizing
 Godawari Power and Ispat produces steel via the sponge iron route and generates
captive power from waste gases produced at the kilns. The company doubled its
sponge iron capacity to 495ktpa and steel billet capacity to 400ktpa along with a
53MW captive power plant (CPP) in FY08. Since then, it has shifted focus to
reducing costs through backward integration. Its 700ktpa iron ore mine and 600ktpa
pellet plant started operations in FY10. The 20MW biomass based power plant
has been commissioned in December 2010.

GODAWARI POWER: BUY, TP-Rs272 (58% upside) PINC Power Picks: March 2011

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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.

GODAWARI POWER: BUY, TP-Rs272 (53% upside):PINC Top Picks

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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).

BUY Godawari Power & Ispat -Encouraging results in current scenario… :ICICI Sec

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Godawari Power & Ispat -Encouraging results in current scenario… 
Godawari Power and Ispat has reported better than estimated numbers
for Q3FY11. The topline grew a robust ~54% QoQ and ~13% YoY led
by improved volumes in all segments (saleable steel volumes up ~31%
QoQ) and robust blended realisations (up ~13% QoQ and ~38% YoY).
EBITDA margins also improved ~240 bps QoQ and ~730 bps YoY
despite a surge in raw material costs (up ~40% QoQ) on the back of
robust topline growth arresting further declines in EBITDA margins.
Similarly, PAT registered a steep rise solely on the back of robust
topline growth despite a rise in interest cost (up ~50% QoQ and
~106% YoY) partly due to an increase  in the loan book (fresh issue of
12% secured debentures aggregating  | 125 crore). A backward
integrated business comprising captive iron ore mines and a flexible
sales product mix of steel, pellets and power make Godawari Power &
Ispat an interesting investment bet. We have maintained our target
price of | 184/share on the stock and rate it as BUY.

Godawari Power & Ispat -Integration benefits; Anand Rathi

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Godawari Power & Ispat
Integration benefits; maintain Buy
Godawari Power & Ispat (GPIL)’s performance was stellar, with
net profit growth of ~56% yoy, which was in line with our
estimates. We raise our FY11e earnings 6.6% (low raw material
costs), but trim FY12e earnings 1.4% (high interest). Buy.

3QFY2011 Result : Buy Godawari Power & Ispat –Target Rs247- Angel Broking

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Godawari Power & Ispat – 3QFY2011 Result Update

Angel Broking maintains a Buy on Godawari Power & Ispat with a Target Price of Rs. 247.

GPIL’s net sales increased by 13.2% yoy and 54.6% qoq to `229cr in 3QFY2011,

while net profit grew by 55.6% yoy and 192.1% qoq to `21cr.

Strong growth in profitability: For 3QFY2011, GPIL’s net sales increased by

13.2% yoy and 54.6% qoq to `229cr on account of a) increased pellet sales

volumes (18,265 tonnes v/s nil in 3QFY2010 and 3,313 tonnes in 2QFY2011)

and b) higher realisations yoy and qoq across product categories. During the

quarter, sponge iron realisation increased by 38.0% yoy (up 17.7% qoq) to

`16,988/tonne and billet realisation increased by 19.1% yoy (up 2.7% qoq) to

`25,331/tonne. Average pellet realisation stood at `7,292/tonne, up 35.8% qoq.

Despite other expenses as a percentage of net revenue increasing to 16.7% from

9.7% in 3QFY2010 on account of higher fuel consumption, lower raw-material

cost (which as a percentage of net revenue declined to 57.1% from 71.1% in

3QFY2010) resulted in a 728bp yoy EBITDA margin expansion to 23.0%.

Consequently, EBITDA grew by 65.8% yoy to `52cr and net income grew by

55.6% yoy to `21cr.