Hold Gujarat Industries; target of Rs 102: BP Equities

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Hold Gujarat Industries; target of Rs 102: BP Equities

BP Equities has maintained hold rating on Gujarat Industries Power Co (GIPCL) with a target of Rs 102 in its May 26, 2011 research report.

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BP Equities has maintained hold rating on Gujarat Industries Power Co (GIPCL)  with a target of Rs 102 in its May 26, 2011 research report.

"Gujarat Industries Power Co (GIPCL) has reported PAT of Rs. 810 mn for the Q4FY11 vs Rs. 361mn for the last year. However this includes deferred tax adjustment and tax refund of Rs. 293 mn and Rs. 92 mn respectively which has led to robust results, excluding that company reported PAT of Rs. 426mn vs Rs. 361 mn YoY. Interest cost and depreciation has shot up substantially as the company has capitalized Surat Lignite Power plant II."

"For Q4FY11, all power stations reported declining plant load factor (PLF) as compared to last year which led to declining volumes for the quarter. The company has commissioned Surat Lignite Power plant II in Q3FY11 with capacity of 250MW and has been operating at PLF of around 60%. The company generated 1108 mn units as compared to 1112 mn units in Q4FY10 and 1184 mn units in Q3FY11. and Inspite of increase in generating capacity company reported declining volumes. The decline was mainly on account of lower PLF at Vadodara plant which operated at 31% PLF vs 81% in Q4FY10 due to maintenance shut down and higher price of gas from Reliance GERC in March 2011 had issued the PPA order on Surat II expansion plant which had not approved grossing up of RoE. The company has filed review petition against this order and expects hearing in next 3 to 4 months. There could be substantial rise in earnings if the order is passed in favour of the company."

"Company's recently commissioned Surat Lignite power plant II has stabilised in Q1FY12. We expect volumes to improve from the current quarter on the back of improving PLF going forward. At the current price of Rs. 84 the stock is trading at P/E 7.8x and P/B 0.9x. We recommend Hold with target price of Rs. 102 per share," says BP Equities research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment