Godawari Power & Lspat

8/6/2019 Godawari Power & Lspat

http://slidepdf.com/reader/full/godawari-power-lspat 1/11

Please refer to important disclosures at the end of this report 1

Standalone (` cr) 1QFY2012 1QFY2011 % chg (yoy) 4QFY2011 % chg (qoq)

Net sales 494 196 152.0 329 50.2

EBITDA 76 36 110.5 72 4.9

% margin 15.4 18.4 (303)bp 22.0 (665)bp

Net income 31 13 143.5 31 (0.7)

Source: Company, Angel Research

For 1QFY2012, Godavari Power & Ispat (GPIL) reported robust top-line growth,

however its profitability was hit on account of higher iron ore and coal costs.

Further, higher interest expenses impacted its bottom-line growth for the quarter.

Rising input costs hit margins: GPIL’s net sales grew by 152.0% yoy to ` 494cr on

account of higher realisation, increased sales volumes and merger with Hira

Industries and R.R. Ispat. Average realisation for sponge iron, HB wires, pellets

and billets grew by 26.3%, 17.6%, 14.3% and 6.6% yoy, respectively. Billet sales

volume for 1QFY2012 was substantially higher at 30,476 tonnes vs. 533 tonnes

in 1QFY2011. Pellet sales volume stood at 43,625 tonnes vs. 8,591 tonnes in

1QFY2011. Raw-material cost as a percentage of net revenue rose to 66.7% in

1QFY2012 vs. 62.2% in 1QFY2011. Thus, although EBITDA grew by 110.5% yoy

to ` 76cr, EBITDA margin contracted by 303bp yoy to 15.4%. Interest expenses

increased by 169.9% yoy to ` 27cr. Consequently, net profit for the quarter

increased by 143.5% yoy to ` 31cr.

Outlook and valuation: Although GPIL’s 1QFY2012 profitability was affected by

higher iron ore and coal costs, going forward we expect GPIL to further improve

its profitability on the back of increased 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 3.6x FY2012E and 2.4x FY2013E EV/EBITDA. On a

P/BV basis, it is trading at 0.6x FY2012E and 0.5x FY2013E estimates.

We maintain our Buy view on GPIL with a revised target price of `221, valuing it

at 3.0x FY2013E EV/EBITDA.

Key financials (Consolidated)

Y/E March (` cr) FY2010 FY2011E FY2012E FY2013E

Net sales 822 1,116 1,774 1,916

% chg (24.7) 35.7 58.9 8.0

Net profit 57 86 109 175

% chg (8.1) 50.0 26.6 60.7

FDEPS (`) 20.5 27.1 34.2 55.0

OPM (%) 15.9 20.8 17.2 20.5

P/E (x) 7.3 5.6 4.4 2.7

P/BV (x) 0.8 0.7 0.6 0.5

RoE (%) 11.9 14.4 14.8 20.0

RoCE (%) 10.5 13.6 15.2 19.9

EV/Sales (x) 1.1 1.0 0.6 0.5

EV/EBITDA (x) 6.9 4.9 3.6 2.4


BUYCMP ` 150

Target Price ` 221

Investment Period 12 months

Stock Info

Sector

Bloomberg Code GODPI@IN

Shareholding Pattern (%)

Promoters 63.7

MF / Banks / Indian Fls 4.7

FII / NRIs / OCBs 4.3

Indian Public / Others 27.3

Abs. (%) 3m 1yr 3yr

Sensex (8.3) (6.4) 12.0

GPIL (16.3) (34.8) (31.0)

Face Value ( ` )

BSE Sensex

Nifty

Reuters Code

Steel

Avg. Daily Volume

Market Cap ( ` cr)

Beta

52 Week High / Low

10

16,990

5,119

GDPI.BO

476

1.0

240/141

28481

Bhavesh Chauhan

Tel: 022- 39357600 Ext: [email protected]

Godawari Power & Ispat

Performance Highlights

1QFY2012 Result Update | Steel

August 8, 2011



Godawari Power | 1QFY2012 Result Update

August 8, 2011 2

Exhibit 1: 1QFY2012 performance (Consolidated)

Y/E March (` cr)1QFY2012Post merger

1QFY2011Pre merger

yoy %FY2011

Post mergerFY2010

Pre merger

Net sales 494 196 152.0 1,116 822

Raw material 330 122 170.5 638 580

% of net sales 66.7 62.2 57.2 70.6

Staff cost 10 6 76.9 35 19

% of net sales 2.0 2.9 3.2 2.3

Other expenditure 78 32 141.9 210 92

% of net sales 15.9 16.5 18.8 11.2

Total expenditure 418 160 161.4 884 692

% of net sales 84.6 81.6 79.2 84.1

Operating profit 76 36 110.5 232 131

OPM (%) 15.4 18.4 20.8 15.9

Other operating income - - - - -EBITDA 76 36 110.5 232 131

EBITDA margins (%) 15.4 18.4 20.8 15.9

Interest 27 10 169.9 73 34

Depreciation 16 11 49.5 55 34

Other income 4 - - 15 4

Exceptional items - - - - -

Profit before tax 37 15 140.1 119 67

% of net sales 7.5 7.8 10.7 8.1

Tax 6 3 124.3 20 11

% of PBT 16.5 17.7 16.6 15.8

Profit after tax 31 13 143.5 86 57

% of net sales 6.2 6.4 7.7 7.0

Source: Company, Angel Research; Note: 1QFY2012 and FY2011 numbers include the impact of

the merger with Hira Industries and R.R Ispat Ltd., while 1QFY2011 and FY2010 do not include the

impact of merger with Hira Industries and R.R. Ispat

Higher steel and pellet sales drive net revenue growth

During the quarter, GPIL’s net sales grew by 152.0% yoy to ` 494cr on account of

higher realisation, increased sales volumes and merger with Hira Industries and

R.R. Ispat. Average realisation for sponge iron, HB wires, pellets and billets grew

by 26.3%, 17.6%, 14.3% and 6.6% yoy, respectively. Billet sales volume for1QFY2012 was substantially higher at 30,476 tonnes vs. 533 tonnes in

1QFY2011. Pellet sales volume stood at 43,625 tonnes vs. 8,591 tonnes in

1QFY2011. However, power sales volume declined by 34.2% yoy to 34mn units

on account of increased captive consumption in steel production. Moreover, ferro

alloy and power realisation declined by 10.5% yoy and 43.2% yoy to

` 51,301/tonne and ` 2.9/unit, respectively.

Higher coal and iron ore costs affect margins

Raw-material cost as a percentage of net revenue rose to 66.7% in 1QFY2012 vs.

62.2% in 1QFY2011 as the rise in iron ore and coal prices more than offset the

rise in product prices. Thus, although EBITDA grew by 110.5% yoy to ` 76cr,

EBITDA margin contracted by 303bp yoy to 15.4%. Interest expenses increased by

169.9% yoy to ` 27cr. Consequently, net profit increased by 143.5% yoy to ` 31cr.




August 8, 2011 3

Exhibit 2: Quarterly production trend

(tonnes) 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 yoy % qoq %

Sponge iron 60,860 80,359 61,535 53,637 75,314 88,955 90,720 47.4 2.0

Billets 16,802 23,370 - 15,228 30,990 39,033 30,031 - (23.1)HB wire 19,506 17,088 14,193 15,130 13,457 18,901 25,664 80.8 35.8

Ferro alloys - 1,500 - 1,888 1,971 1,312 1,988 - 51.5

Power (mn units) 71 88 76 62 80 92 101 33.0 9.7

Iron ore 32,418 128,044 141,984 56,017 111,398 212,308 76,186 (46.3) (64.1)

Pellet - 48,305 55,396 62,315 103,100 133,750 153,400 176.9 14.7


Exhibit 3: Quarterly sales volume trend

(tonnes) 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 yoy % qoq %

Sponge iron 42,226 59,768 61,144 38,460 41,194 44,001 58,974 (3.5) 34.0

Billets 17,153 23,221 533 14,478 31,168 39,097 30,476 5,617.8 (22.1)

HB wire 15,569 17,934 13,609 12,866 14,952 19,566 24,802 82.2 26.8

Ferro alloys - 1,168 649 1,259 852 2,322 1,631 151.3 (29.8)

Power (mn units) 36 37 52 18 19 22 34 (34.2) 51.8

Pellet - 8,473 8,591 3,319 18,265 49,561 43,625 407.8 (12.0)


Exhibit 4: Quarterly realisation trend

(`/tonne) 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 yoy % qoq %

Sponge iron 12,236 15,384 15,365 14,438 16,988 19,445 19,404 26.3 (0.2)

Billets 21,005 24,151 28,143 24,669 25,331 28,741 30,002 6.6 4.4

HB wire 27,703 29,458 30,502 28,956 29,441 34,811 35,855 17.6 3.0

Ferro alloys - 57,534 57,319 53,366 52,289 51,981 51,301 (10.5) (1.3)

Power ( ` /unit) 3.4 3.9 5.1 2.6 2.9 2.5 3.0 (43.2) 16.6

Pellet - 5,571 7,252 5,371 7,292 7,924 8,291 14.3 4.6





August 8, 2011 4

Investment rationale

Mining capacity at Ari Dongri mine to increase

Currently, GPIL has an approval to mine 0.6mn tonnes of iron ore from the Ari Dongri mine. Management aims to increase the mining capacity to

0.9mn tonnes during FY2012. Increased production from captive iron ore mine

should further lower costs, given a steep rise in iron ore prices recently.

Increasing pellet sales to improve GPIL’s profits

GPIL’s 0.6mn tonne pellet plant in its 75% subsidiary Ardent Steel in Keonjhar,

Orissa, started commercial production during August 2010. This coupled with

GPIL’s 0.6mn tonne pellet plant should drive strong profitability growth in FY2012

and FY2013, as we expect pellet prices to remain firm during FY2012.

Billet production to increase during FY2012

Merchant power rates have recently declined to ` 2.5–3.0 per unit. We expect

merchant power rates to remain stable in the medium term. Hence, we expect GPIL

to increase billet production as the company operates a flexible business model

that allows it to interchange between steel and power, depending on the business

economics.

Outlook and valuation

Although GPIL’s 1QFY2012 profitability was affected by higher iron ore and coal

costs, going forward we expect GPIL to further improve its profitability on the back

of the 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 3.6x FY2012E and 2.4x FY2013E EV/EBITDA. On a P/BV basis, it is

trading at 0.6x FY2012E and 0.5x FY2013E estimates. We maintain our Buy view

on GPIL with a revised target price of `221, valuing it at 3.0x FY2013E EV/EBITDA.

While we have raised our sales estimates to account for increased sponge iron

sales and higher realisation, we have cut our profitability estimates on account of a

sharp rise in iron ore and coal costs for the company (as witnessed in 1QFY2012).

Exhibit 5: Earlier vs. revised estimates

(` cr) Earlier estimates Revised estimates Upgrade/(downgrade) (%)

FY12E FY13E FY12E FY13E FY12E FY13E

Net sales 1,425 1,607 1,774 1,916 24.5 19.2

EBITDA 286 349 304 396 6.6 13.5

EBITDA margin (%) 20.0 21.7 17.2 20.7 (288)bp (105)bp

PBT 176 231 141 226 (19.8) (2.4)

PAT 131 174 109 178 (17.0) 2.2

PAT margin (%) 9.2 10.8 6.1 9.3 (306)bp (155)bp





August 8, 2011 5

Exhibit 6: EPS – Angel forecast vs. consensus

Year (`) Angel forecast Bloomberg consensus Variation (%)

FY2012E 34.2 38.3 (10.6)

FY2013E 55.0 46.9 17.3

Source: Bloomberg, Angel Research

Exhibit 7: EV/EBITDA band


Exhibit 8: P/E band


0

500

1,000

1,500

2,000

2,500

3,000

Apr-06 Dec-06 Aug-07 Apr-08 Dec-08 Aug-09 Apr-10 Dec-10 Aug-11

( `

c r )

2x 4x 6x 8x

0

100

200

300

400

500

600


( ` )

2x 4x 6x 8x 12x




August 8, 2011 6

Exhibit 9: P/BV band


Exhibit 10: Recommendation summary

Companies CMP Target Reco. Mcap Upside P/E (x) P/BV (x) EV/EBITDA (x) RoE (%) RoCE (%)

(`) Price (`) (` cr) (%) FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E

Bhushan 344 - Neutral 7,311 - 9.3 9.2 1.4 1.2 8.1 7.2 16.1 14.0 8.6 7.9

GPIL 150 221 Buy 476 47 4.4 2.7 0.6 0.5 3.6 2.4 14.8 20.0 15.2 19.9

Monnet Ispat 468 549 Buy 3,011 17 10.2 7.7 1.2 1.1 10.1 7.4 12.9 16.1 8.1 10.5

SEML 177 259 Buy 632 47 7.6 6.4 0.8 0.7 5.9 4.2 12.0 12.8 8.7 9.5


0

100

200

300

400

500

600


( ` )

0.5x 1.0x 1.5x 2.0x




August 8, 2011 7

Profit & Loss Statement (Consolidated)

Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

Gross sales 936 1,233 887 1,221 1,897 2,049

Less: Excise duty 126 141 64 105 123 133Net sales 810 1,092 822 1,116 1,774 1,916

Other operating income - - - - - -

Total operating income 810 1,092 822 1,116 1,774 1,916

% chg 69.6 34.8 (24.7) 35.7 58.9 8.0

Total expenditure 642 969 692 884 1,469 1,524

Net raw materials 553 876 580 638 1,000 1,016

Other mfg costs 78 79 92 210 426 460

Personnel 11 14 19 35 43 48

Other - - - - - -

EBITDA 168 123 131 232 304 392

% chg 98.0 (26.8) 6.2 78.0 30.9 28.9

(% of net sales) 20.7 11.3 15.9 20.8 17.2 20.5

Depreciation 26 28 34 55 67 73

EBIT 142 94 96 177 237 319

% chg 95.7 (33.6) 2.1 83.6 33.9 34.9

(% of net sales) 17.6 8.6 11.7 15.9 13.4 16.7

Interest charges 31 36 34 73 112 115

Other income 2 11 4 15 16 18

(% of PBT) 1.6 16.2 6.0 13.0 11.3 7.9

Share in profit of asso. - - - - - -

Recurring PBT 113 70 67 119 141 222

% chg 81.4 (37.6) (5.1) 79.0 18.3 57.4

Extra. Inc/(Expense) - - - - - -

PBT (reported) 113 70 67 119 141 222

Tax 14 8 11 20 24 38

(% of PBT) 12.3 11.9 15.8 16.6 17.0 17.0

PAT (reported) 99 61 56 99 117 184

Add: Earnings of asso. 1 1 1.2 0.4 - -

Less: Minority interest - - - (14) (8) (10)

Extra. Expense/(Inc.) 0.1 (0.0) (0.0) - - -

PAT after MI (reported) 100 62 57 86 109 175Adj. PAT 100 62 57 86 109 175

% chg 86.6 (37.4) (8.1) 50.0 26.6 60.7

(% of net sales) 12.3 5.7 7.0 7.7 6.1 9.1

Basic EPS (`) 40.8 23.1 21.2 27.1 34.2 55.0

Fully diluted EPS (̀ ) 35.6 22.3 20.5 27.1 34.2 55.0

% chg 58.4 (37.4) (8.1) 32.1 26.6 60.7




August 8, 2011 8

Balance Sheet (Consolidated)

Y/E March (` cr) FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E

SOURCES OF FUNDS

Equity share capital 27 27 27 32 32 32

Reserves & surplus 364 419 471 573 671 834

Shareholders’ funds 391 446 498 605 702 866

Share warrants 3 3 - - - -

Minority interest - 7 10 76 85 94

Total loans 293 355 518 884 756 706

Deferred tax liability 2 2 1 - - -

Total liabilities 689 812 1,027 1,566 1,543 1,666

APPLICATION OF FUNDS

Gross block 464 495 752 942 1,092 1,192

Less: Acc. depreciation 60 89 122 178 245 318

Net Block 404 407 630 1,021 847 874

Capital work-in-progress 15 202 194 44 14 11

Goodwill 5 5 5 - - -

Investments 19 10 12 22 174 174

Current assets 323 267 288 678 697 794

Cash 64 44 20 214 147 229

Loans & advances 41 47 59 110 110 110

Other 219 176 210 355 441 454

Current liabilities 78 77 101 205 194 192

Net current assets 246 189 188 474 503 602

Deferred Tax Asset - - - 5 5 5Mis. exp. not written off - - - - - -

Total assets 689 812 1,027 1,566 1,543 1,666




August 8, 2011 9

Cash flow statement (Consolidated)

Y/E March (` cr) FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E

Profit before tax 113 70 67 119 141 222

Depreciation 26 28 34 55 67 73Change in working capital (90) 39 (23) (278) 8 (16)

Less: Other income 31 31 33 - - -

Direct taxes paid 12 14 10 20 24 38

Cash flow from operations 66 155 101 (123) 192 242

(Inc.)/ Dec. in fixed assets (61) (217) (250) (40) (120) (98)

(Inc.)/ Dec. in investments (14) 10 - - - -

(Inc.)/ Dec. in loans and advances

Other income 1 7 1 - - -

Cash flow from investing (74) (200) (250) (40) (120) (98)

Issue of equity 100 - - - - -

Inc./(Dec.) in loans 3 62 163 366 (129) (50)

Dividend paid 10 8 8 9 11 11

Others 34 29 30 - - -

Cash flow from financing 59 25 125 357 (140) (61)

Inc./(Dec.) in cash 51 (20) (24) 194 (68) 83

Opening cash bal. 13 64 44 20 214 147

Closing cash bal. 64 44 20 214 147 229




August 8, 2011 10

Key ratios

Y/E March FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E

Valuation ratio (x)

P/E (on FDEPS) 4.2 6.7 7.3 5.6 4.4 2.7P/CEPS 3.3 4.6 4.6 3.4 2.7 1.9

P/BV 1.0 0.9 0.8 0.7 0.6 0.5

Dividend yield (%) 2.7 1.7 1.7 1.7 2.0 2.0

EV/Sales 0.8 0.7 1.1 1.0 0.6 0.5

EV/EBITDA 3.8 5.8 6.9 4.9 3.6 2.4

EV/Total assets 0.9 0.9 0.9 0.7 0.7 0.6

Per share data (`)EPS (Basic) 40.8 23.1 21.2 27.1 34.2 55.0

EPS (fully diluted) 35.6 22.3 20.5 27.1 34.2 55.0

Cash EPS 44.9 32.5 32.7 44.5 55.5 78.0

DPS 4.0 2.5 2.5 2.5 3.0 3.0

Book value 146.4 169.1 188.7 214.6 248.0 302.5

DuPont analysis

EBIT margin 17.6 8.6 11.7 15.9 13.4 16.7

Tax retention ratio (%) 87.7 88.1 84.2 83.4 83.0 83.0

Asset turnover (x) 1.5 1.6 0.9 0.9 1.3 1.4

RoIC (Post-tax) 22.4 11.9 9.1 12.5 14.3 18.7

Cost of debt (post tax) 9.5 9.7 6.5 8.7 11.3 13.1

Leverage (x) 0.6 0.7 1.0 1.0 0.8 0.5

Operating RoE 30.0 13.5 11.7 16.3 16.6 21.5

Returns (%)

RoCE (Pre-tax) 23.9 12.6 10.5 13.6 15.2 19.9

Angel RoIC (pre-tax) 28.6 16.0 14.0 16.7 17.6 22.8

RoE 33.1 14.7 11.9 14.4 14.8 20.0

Turnover ratios (x)

Asset turnover (gross block) 2.1 2.3 1.3 1.3 1.7 1.7

Inventory (days) 115 60 109 164 122 122

Receivables (days) 20 10 16 22 22 22

Payables (days) 20 16 12 25 24 23

WC cycle (days) 61 53 71 81 71 73

Solvency ratios (x)Net debt to equity 0.6 0.7 1.0 1.0 0.8 0.5

Net debt to EBITDA 13.6 25.3 38.2 28.9 20.0 12.1

Interest coverage 4.5 2.7 2.9 2.4 2.1 2.8




August 8, 2011 11

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

DISCLAIMER

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .

Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking orother advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in

the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, pleaserefer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited andits affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement Godawari Power

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

Date post:	07-Apr-2018
Category:	Documents
Upload:	angel-broking
View:	218 times
Download:	0 times

Godawari Power & Lspat

Documents