Buy Gujarat Industries Power; tgt of Rs 96: Angel Broking

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Buy Gujarat Industries Power; tgt of Rs 96: Angel Broking

Angel Broking is bullish on Gujarat Industries Power and has recommended buy rating on the stock with a target of Rs 96 in its August 12, 2011 research report.

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Angel Broking is bullish on Gujarat Industries Power and has recommended buy rating on the stock with a target of Rs 96 in its August 12, 2011 research report.

"Gujarat Industries Power Co.(GIPCL) 1QFY2012 top line rose by 35.7% yoy to Rs343cr, aided by higher capacity. The 250MW SLPP station-II, which was in trial stages during 1QFY2011, was commercially operational during 1QFY2012. The company's operating margin rose substantially by 1,246bp yoy to 37.8% on account of healthy availability factor in all the plants enabling full recovery of fixed costs along with incentives; and higher generation of lignite-based power. Despite the huge 102.4% increase in operating profit, the bottom line rose only marginally by 2.8% yoy to Rs43cr due to higher interest (Rs32cr vs. Rs4cr in 1QFY2011) and depreciation (Rs41cr vs. Rs21cr in 1QFY2011) costs."

"GIPCL's plants including the newly commissioned Surat Lignite Power Plant (SLPP) station II had healthy plant availability factor (PAF). Vadodara stations I and II had PAF of 100% and 90.8%, respectively. SLPP I and II stations operated at PAFs of 90.1% and 78.4%, higher than normative PAF of 75%. However, PLFs were low at 58.9% and 60.2% at Vadodara I and II, respectively. PLFs in SLPP I and II stations were better at 75.8% and 71.6%, respectively. High availability factor coupled with higher generation of lignite-based power resulted in margin expansion of 1,246bp yoy to 37.8% during the quarter."

"Going ahead, we expect GIPCL to report steady performance on the profitability front due to the stabilisation of 250MW SLPP station II. However, the second quarter is a seasonally weak quarter on account of monsoons, resulting in low demand and maintenance activities planned by the company. At the CMP of Rs83, the stock is trading at 0.8x FY2013 P/BV. We have assigned a P/BV of 0.9x on FY2013 book value to arrive at a target price of Rs 96. We maintain our Buy rating on the stock," says Angel Broking research report. 

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