Dear All,
Forwarding you the Result Update on Godawari Power & Ispat for 4QFY2011 with a Buy recommendation and a Target Price of `225 (12 months).
Godavari Power & Ispat (GPIL) reported strong set of numbers for 4QFY2011. The company’s standalone net sales grew by 40.2% yoy to `329cr, while net profit increased by 37.3% yoy to `31cr. We maintain our Buy view on the stock.
Strong growth in profitability continues: For 4QFY2011, GPIL’s net sales grew by 40.2% yoy to `329cr on account of higher realisation and sales volumes. During the quarter, pellet sales volume was substantially higher at 49,561 tonnes vs. 8,473 tonnes in 4QFY2010. Billet sales volume increased by 68.4% yoy to 39,097 tonnes and that of ferro alloy increased by 98.8% yoy to 2,322 tonnes. Average realisation for pellets, sponge iron, billets and HB wire grew by 42.2%, 26.4%, 19.0% and 18.2% yoy, respectively. However, sponge iron and power sales volume fell by 26.4% yoy and 38.6% yoy, respectively, on account of increased captive consumption in steel production. EBITDA margin expanded by 228bp yoy to 22.0% due to lower raw-material cost, which, as a percentage of net revenue, fell to 58.1% in 4QFY2011 vs. 64.0% in 4QFY2010. Thus, EBITDA grew by 56.4% yoy to `72cr. Interest expenses increased by 127% yoy to `23cr due to which net profit increased by only 37.3% yoy to `31cr.
Outlook and valuation: GPIL reported strong profitability growth in 4QFY2011. Despite higher prices of key inputs, GPIL remains well poised to sustain strong profitability on account of pellet sales going forward. At the CMP, the stock is trading at 4.2x FY2012E and 3.1x FY2013E EV/EBITDA. On a P/BV basis, it is trading at 0.7x FY2012E and 0.6x FY2013E estimates. We maintain Buy on GPIL with a revised target price of `225, valuing it at 3.5x FY2013E EV/EBITDA.
Kindly click on the following link to view the Report.
Godawari Power & Ispat - RU4QFY2011
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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