Buy Godawari Power, target of Rs 418: Emkay

Emkay Research has maintained its buy rating on Godawari Power & Ispat with a target price of Rs 418 in its June 25, 2008 research report. "We have valued GPIL under 2 scenarios. In our base case scenario, we have assumed GPIL to be only 15% captive for iron ore in FY10. On base case, our target price stands at Rs 418, which is 6x FY10E FDEPS of Rs 69.6, signifying a potential upside of 115%. However, considering the savings from captive iron ore mine, (assuming GPIL to be 70% captive for iron ore in FY10), GPIL will likely report FY10 FDEPS of Rs 92.5, (33% higher than our original estimates) at which our new target price will be Rs 555 (6x FY10E FDEPS of Rs 92.5), signifying a potential upside of 186% without considering the fact that the captive iron ore should lead to re-rating of the stock."

"At the CMP of Rs 194, the stock is trading at 2.8x FY10E FDEPS of Rs 69.6 and at 2.4x FY10E EV/EBITDA. We maintain BUY on the stock with a target price of Rs 418. We will revisit our target price upon company receiving mining lease," says Emkay's research report.

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