Please refer to important disclosures at the end of this report 1 Standalone (` cr) 1QFY2012 1QFY2011 % chg (yoy) 4QFY2011 % chg (qoq) Net sales 494 196 152.0 329 50.2 EBITDA76 36 110.5 72 4.9 % margin 15.4 18.4 (303)bp 22.0 (665)bp Net income 31 13 143.5 31 (0.7) Source: Company, Angel Research For 1QFY2012, Godavari Power & Ispat (GPIL) reported robust top-line growth, however its profitability was hit on account of higher iron ore and coal costs. Further, higher interest expenses impacted its bottom-line growth for the quarter. Rising input costs hit margins: GPIL’s net sales grew by 152.0% yoy to `494cr on account of higher realisation, increased sales volumes and merger with Hira Industries and R.R. Ispat. Average realisation for sponge iron, HB wires, pellets and billets grew by 26.3%, 17.6%, 14.3% and 6.6% yoy, respectively. Billet sales volume for 1QFY2012 was substantially higher at 30,476 tonnes vs. 533 tonnes in 1QFY2011. Pellet sales volume stood at 43,625 tonnes vs. 8,591 tonnes in 1QFY2011. Raw-material cost as a percentage of net revenue rose to 66.7% in 1QFY2012 vs. 62.2% in 1QFY2011. Thus, although EBITDA grew by 110.5% yoyto `76cr, EBITDA margin contracted by 303bp yoy to 15.4%. Interest expenses increased by 169.9% yoy to `27cr. Consequently, net profit for the quarter increased by 143.5% yoy to `31cr. Outlook and valuation: Although GPIL’s 1QFY2012 profitability was affected byhigher iron ore and coal costs, going forward we expect GPIL to further improve its profitability on the back of increased high-margin pellet sales. A key catalyst for the stock would be commencement of iron ore mining from Boria Tibu. At the CMP, the stock is trading at 3.6x FY2012E and 2.4x FY2013E EV/EBITDA. On a P/BV basis, it is trading at 0.6x FY2012E and 0.5x FY2013E estimates. We maintain our Buy view on GPIL with a revised target price of `221, valuing it at 3.0x FY2013E EV/EBITDA. Key financials (Consolidated) Y/E March (` cr) FY2010 FY2011E FY2012E FY2013E Net sales 822 1,116 1,774 1,916 % chg (24.7) 35.7 58.9 8.0 Net profit 57 86 109 175 % chg (8.1) 50.0 26.6 60.7 FDEPS (`) 20.5 27.1 34.2 55.0 OPM (%) 15.9 20.8 17.2 20.5 P/E (x) 7.3 5.6 4.4 2.7 P/BV (x) 0.8 0.7 0.6 0.5 RoE (%) 11.9 14.4 14.8 20.0 RoCE (%) 10.5 13.6 15.2 19.9 EV/Sales (x) 1.1 1.0 0.6 0.5 EV/EBITDA (x) 6.9 4.9 3.6 2.4 Source: Company, Angel Research BUY CMP `150 Target Price `221 Investment Period 12 months Stock Info Sector Bloomberg Code GODPI@IN Shareholding Pattern (%) Promoters 63. 7 MF / Banks / Indian Fls 4.7 FII / NRIs / OCBs 4.3 Indi an Public / Others 27. 3 Abs. (%) 3m 1yr 3yr Sensex ( 8.3) (6.4) 12.0 GPIL (16.3) (34.8) (31.0) Face Value ( `) BSE Sensex NiftyReuters Code Steel Avg. Daily Volume Market Cap ( `cr) Beta 52 Week High / Low 10 16,990 5,119 GDPI.BO 476 1.0 240/141 28481 Bhavesh Chauhan Tel: 022- 39357600 Ext: 6821 [email protected]Godawari Power & Ispat Performance Highlights 1QFY2012 Result Update | Steel August 8, 2011
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