Buy Gujarat Industries Power; target of Rs 91: Emkay Global Financial

Emkay Global Financial's report on Gujarat Industries Power

Q4FY20 adjusted PAT declined 10.0% yoy due to a fall in renewable generation, lower sales amid the nationwide lockdown and high employee expenses due to provisioning of gratuity. Overall generation fell 4.5% yoy to 1.13bn units in Q4FY20. Power generation dropped across all the stations, barring Surat II. Plant load factor (PLF) declined at Vadodara I and Surat I units, while it improved at the Surat II unit. On the renewables front, PLF was down for both the solar and wind plants. GIPCL expects to commission 100MW solar capacity it secured under the Gujarat Urja Vikas Nigam (GUVNL) tender at a tariff of Rs2.68/unit by Q4FY21. Vadodara II extension is unlikely to operate at the desired PLF level in FY21 due to subdued power demand.

Outlook

We have pruned FY21/FY22 earnings estimates to factor in lower power demand amid subdued economic activity. Accordingly, we have reduced our TP to Rs91 from Rs99 earlier. We maintain Buy on attractive valuations (0.3x FY22E P/BV).

Gujarat Industries Power 18062020

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