Gujarat Industries Power Company - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, Gujarat Industries Power Company (GIPCL) posted a 20.1% yoy growth in top-line to Rs.360cr. The company's operating margin expanded by 534bp yoy to 35.8% aided by higher PAF yoy at SLPP stations I and II. PAF for SLPP stations I and II stood at healthy 88.8% (78.4%) and 75.3% (61.6%) respectively. However, Vadodara station I and II reported lower PAF yoy at 82.4% (97.6% in 2QFY2012) and 77.7% (98.9% in 2QFY2012), respectively on account of lower availability of gas.

Operational highlights: For 2QFY2013, GIPCL reported a subdued operational performance at Vadodara station due to lower availability of gas. PLF at Vadodara station I and II stood at 44.7% (70.7% in 2QFY2012) and 39.3% (37.3% in 2QFY2012) respectively. SLPP stations I and II reported higher PLF yoy at 77.8% (66.3% in 2QFY2012) and 63.9% (46.5% in 2QFY2012), respectively. The OPM improved by 534bp yoy to 35.8%. The company benefited from an exceptional gain of Rs.60cr, Rs.40 due to realization of contractual claims and Rs.20cr due to energy billing claims being settled during the quarter. However, adjusting for exceptional gain, the company reported a loss of Rs.28cr on account of higher tax (Rs.94cr) booked in the quarter.

Outlook and valuation: GIPCL is well placed in terms of fuel security, with the entire fuel requirement of 500MW SLPP stations I and II met from captive lignite mines. Further, power generated by the company has assured offtake through PPAs signed under the cost-plus model, ensuring RoE of 14% (excl. generation linked incentives) at 75% and 80% PAF for lignite and gas-based plants. At the current market price of Rs.69, the stock is trading attractively at 0.6x FY2014 P/BV. We have assigned a P/BV multiple of 0.7x on FY2014 book value to arrive at a target price of Rs.78. We maintain Accumulate recommendation on the stock.

Source : Equity Bulls

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