Accumulate GIPCL; target of Rs 78: Angel Broking

Angel Broking is bullish on Gujarat Industries Power (GIPCL) and has recommended accumulate rating on the stock with a target of Rs 78 in its February 11, 2013 research report.
 
“For 3QFY2013, Gujarat Industries Power Company (GIPCL)’s operating profit rose by 49.5percent yoy to Rs137cr. The robust operating performance was aided by a favorable base effect (as Surat Lignite Power Plant [SLPP] station II had recorded a lower plant availability factor (PAF) of 61.6percent in 3QFY2012 due to technical problems compared to healthy 97.9percent in 3QFY2013). PAF for SLPP stations I stood at a healthy 89.0percent (83.9percent in 3QFY2012) while that for Vadodara station I and II stood at a healthy 98.6percent (96.0percent in 3QFY2012) and 99.9percent (95.0percent in 3QFY2012). Consequently the company posted an impressive growth in net profit to Rs70cr (Rs17cr in 3QFY2012).”
 
“For 3QFY2013, GIPCL reported a 4.8percent yoy decline in top-line to Rs369cr, largely on account of lower fuel cost (since fuel cost is pass through). During the quarter, the company registered a 6.8percent yoy increase in power generation to 1,264BU. Plant load factor (PLF) at Vadodara station I stood at 63.8percent (58.6percent in 3QFY2012) while SLPP stations I and II reported a higher PLF yoy at 83.6percent (78.7percent in 3QFY2012) and 91.8percent (56.7percent in 3QFY2012), respectively. However, lower off-take due to expensive gas led to a sharp decline in PLF of Vadodara station II to 23.7percent (67.3percent in the corresponding quarter of last year).”
 
“GIPCL is well placed in terms of fuel security, with the entire fuel requirement of 500MW SLPP stations I and II being met by captive lignite mines. Further, power generated by the company has assured offtake through power purchase agreements (PPAs) signed under the cost-plus model, ensuring RoE of 14percent (excl. generation linked incentives) at 75percent and 80percent PAF for lignite and gas-based plants, respectively. At the current market price of Rs70, the stock is trading attractively at 0.6x FY2014E P/BV. We have assigned a P/BV multiple of 0.7x on FY2014 book value to arrive at a target price of Rs78. We maintain Accumulate recommendation on the stock,” says Angel Broking research report.

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