Accumulate Godawari Power; target of Rs 112: Angel Broking

Angel Broking is bullish on Godawari Power and has recommended accumulate rating on the stock with a target of Rs 112 in its February 08, 2013 research report.
 
“Godawari Power and Ispat (GPIL) reported a strong growth in bottom-line in its 3QFY2013 results. The consolidated net sales grew by 25.3% yoy to Rs603cr, while net profit increased by 75.8% yoy to Rs20cr. We recommend Accumulate rating on the stock.”
 
“GPIL’s net sales grew by 25.3% yoy to Rs603cr on account of higher sales volumes of billets, HB wire and ferro alloys. However, higher volumes were partially offset by lower realizations. Average realization for sponge iron, billets and HB Wire declined by 3.9%, 3.4% and 2.1% yoy respectively. Employee cost as a percentage of net revenue fell to 2.7% in 3QFY2013 vs 2.8% in 3QFY2012 and other expenditure as a percentage of net revenue rose to 17.6% in 3QFY2013 vs 17.2% in 3QFY2012. Thus, EBITDA margin was flat at 11.6% and EBITDA grew by 24.9% yoy to Rs70cr. Net profit increased by 75.8% yoy to Rs20cr. The company refrained from providing any timelines for commencement of production from Boria Tibu iron ore mines.”
 
“GPIL reported a strong operating performance during 3QFY2013. Going forward, we expect GPIL to further improve its profitability on the back of increase in 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 4.3x FY2013E and 3.9x FY2014E EV/EBITDA. On a P/BV basis, it is trading at 0.4x FY2013E and 0.3x FY2014E estimates. We recommend Accumulate rating on GPIL with a revised target price of Rs112, valuing it at 4.0x FY2014E EV/EBITDA,” says Angel Broking research report.

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