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Y/E March (` cr) 3QFY2012 2QFY2012 % chg qoq 3QFY2011 % chg yoy
Net revenue 391 304 28.7 308 26.9
Operating profit 94 95 (0.6) 82 15.1
OPM (%) 24.1 31.2 (710)bp 39.0 (1,484)bp
Net profit 17 28 (39.2) 24 (30.6)
Source: Company, Angel Research
For 3QFY2012, GIPCL’s operating profit rose by 15.1% yoy to ` 94cr, lower than
our estimate of ` 117cr. Lower-than-expected performance was on account of low
PAF in SLPP station II, which had technical problems. Expensive gas led to a
decline in PLF for gas-based plants, resulting in lower generation-linkedincentives. The company’s bottom line fell by 30.6% yoy to ` 17cr due to higher
depreciation and higher taxation. The company incurred tax of ` 6cr during the
quarter vs. negative taxation of ` 8cr in 3QFY2011. We maintain our Buy
recommendation on the stock.
Under recoveries and lower incentives result in a decline in OPM: GIPCL posted
top-line growth of 26.9% yoy, largely driven by higher fuel cost. During the
quarter, the company’s generation remained flat yoy at 1,181MU, while fuel cost
rose by 34.1% on account of higher gas prices. Overall PLF for the quarter stood
at low 67% due to low offtake from gas-based stations because of higher power
cost on account of expensive gas prices. SLPP station II had low PAF of 61.6%
during the quarter (60% in 3QFY2011), which led to under recoveries. However, Vadodara stations I and II had healthy PAF of 96.1% (93.7% in 3QFY2011) and
95.1% (100% in 3QFY2011), respectively. SLPP I station also operated at high
PAFs of 83.9% (89.2% in 3QFY2011).
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 CMP of ` 71, the stock is trading attractively at 0.7x FY2013 P/BV. We have
assigned a P/BV of 0.9x on FY2013 book value to arrive at a target price of ` 93.
We maintain our Buy recommendation on the stock.
Key financials
Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E
Net sales 939 1,089 1,429 1,567
% chg (18.7) 16.0 31.2 9.6
Net profit 107 163 129 159
% chg 24.5 52.5 (20.8) 23.3
OPM (%) 23.3 28.7 29.9 28.7
EPS (`) 7.1 10.8 8.5 10.5
P/E (x) 10.1 6.6 8.3 6.7
P/BV (x) 0.9 0.8 0.7 0.7
RoE (%) 8.8 12.5 9.2 10.6
RoCE (%) 5.8 7.6 10.3 11.1
EV/Sales (x) 2.3 2.0 1.4 1.1
EV/EBITDA (x) 9.8 7.0 4.7 4.0
Source: Company, Angel Research
BUYCMP ` 71
Target Price ` 93
Investment Period 12 Months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 58.2
MF / Banks / Indian Fls 19.1
FII / NRIs / OCBs 2.4
Indian Public / Others 20.3
Abs. (%) 3m 1yr 3yr
Sensex 2.7 1.4 86.0
GIP (8.2) (15.6) 49.2
Power
Avg. Daily Volume
Market Cap ( ` cr)
Beta
52 Week High / Low
Face Value ( ` )
BSE Sensex
Nifty
Reuters Code
10
17,831
5,412
GJIP.BO
GIP@IN
1,074
0.7
96/64
10,452
V Srinivasan
022-39357800 - Ext 6831
Sourabh Taparia
022-39357800 - Ext 6815
GIPCL
Performance Highlights
3QFY2012 Result Update | Power
February 9, 2012
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GIPCL | 3QFY2012 Result Update
February 9, 2012 2
Exhibit 1: 3QFY2012 performance
Y/E March (` cr) 3QFY12 2QFY12 % chg qoq 3QFY11 % chg yoy 9MFY12 9MFY11 % chg
Net Sales 391 304 28.7 308 26.9 1,037 774 33.9
Fuel Cost 251 164 52.8 187 34.1 592 479 23.5(% of Sales) 64.3 54.2 49.0 57.1 61.9
Staff Costs 12 13 (3.8) 16 (21.3) 37 34 8.9
(% of Sales) 3.2 4.2 4.8 3.6 4.4
Other Expenses 33 31 4.5 23 43.7 89 71 25.0
(% of Sales) 8.4 10.4 7.2 8.6 9.2
Total Expenditure 296 209 42.0 226 31.2 718 585 22.8
Operating Profit 94 95 (0.6) 82 15.1 319 190 68.1
OPM (%) 24.1 31.2 (710bp) 39.0 (1484)bp 30.7 24.5 625bp
Interest 30 29 2.1 27 10.5 91 43 113.5
Depreciation 42 42 (0.4) 39 8.1 126 88 43.3
Other Income 0 0 - 0 30.0 1 2 (57.1)
PBT 23 24 (4.1) 16 39.2 103 61 68.5
(% of Sales) 5.9 7.9 19.0 10.0 7.9
Provision for Taxation 6 (4) (263.3) (8) (178.5) 16 (21)
(% of PBT) 26.6 (15.7) (35.7) 15.1 (33.5)
Reported PAT 17 28 (39.2) 24 (30.6) 88 82 7.2
PATM (%) 4.3 9.1 25.8 8.5 10.6
EPS (`) 1.1 1.8 (39.2) 1.6 (30.6) 6 5.4 7.2
Source: Company, Angel Research
Exhibit 2: Actual vs. Angel estimates (3QFY2012)
(` cr) Actual Estimates Variation (%)
Net sales 391 357 9.5
Operating profit 94 117 (19.3)
OPM (%) 24 33 (900)
Net profit 17 37 (54.9)
Source: Company, Angel Research
Exhibit 3: Performance trend
Source: Company, Angel Research
214
308 315343
304
391
15 24
81
4328 17
0
5
10
15
20
25
30
35
4045
0
50
100
150
200
250
300
350
400450
2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
( % )
( `
c r )
Net Sales Net Profit OPM (RHS)
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GIPCL | 3QFY2012 Result Update
February 9, 2012 3
Performance highlights
For 3QFY2012, GIPCL reported top-line growth of 26.9% yoy to ` 391cr. However,
the company’s operating margin declined substantially by 1,484bp yoy to 24.1%
due to higher fuel costs as gas prices were higher on a yoy basis. PAF for SLPP
station II stood at 61.6% for the quarter, below the levels where fixed charges can
be recovered completely. Nevertheless, PAFs were healthy for the remaining
plants. Vadodara stations I and II had healthy PAF of 96.1% (93.7% in 3QFY2011)
and 95.1% (100% in 3QFY2011), respectively. SLPP I station also operated at high
PAFs of 83.9% (89.2% in 3QFY2011). The company has indicated that the
Generator Rotor of Unit 1 of SLPP station I had tripped during January 2012. The
faulty generator rotor is currently under repair at BHEL’s factory in Hyderabad. This
unit is scheduled to commence activities by the end of March.
Although operating profit grew by 15.1% yoy during the quarter, the company’sbottom line fell by 30.6% yoy to ` 17cr due to higher depreciation and taxation.
The company incurred tax of ` 6cr in 3QFY2012 vs. negative taxation of ` 8cr in
3QFY2011.
Operational highlights
GIPCL’s total power generation stood at 1,181MU in 3QFY2012 vs. 1,184MU in
3QFY2011. Power generation at Vadodara station I and II stood at 188MU and
245MU, respectively. SLPP stations I and II generated 434MU and 313MU of
power, respectively, during the quarter.
Exhibit 4: PLF of plants
Source: Company, Angel Research
84
95
80
59
7774
58
67
8083
80 79
43
57
0
20
40
60
80
100
FY2009 FY2010 FY2011 3QFY12
Vadodara Station 1 - 145MW Vadodara Station 2 - 165MW SLPP station I SLPP station II
( % )
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GIPCL | 3QFY2012 Result Update
February 9, 2012 4
Investment arguments
Capacity addition to drive growth
SLPP station II (125x2MW), set up at a cost of ` 1,630cr, was declared commercialin FY2011. Lignite for this station will be procured from the company’s captive
lignite mines in Mangrol, developed exclusively for the project. This expansion
would boost the company’s profitability and will significantly improve cash flows
going ahead.
Currently, the company is in the process of setting up a new 600MW lignite-based
power plant in Surat, which includes development of a captive mine. Bids for the
project have been invited through international competitive bidding. The bids are
currently under evaluation. The company has also commissioned a 5MW
photovoltaic crystalline silicon modules based solar plant at Vastan mines of SLPP
station I in January 2012.
Exhibit 5: Snapshot of projects
Plant Capacity(MW)
Fuel Type Off-take arrangement GuaranteedRoE (%)
Vadodara-I 145 Gas/RLNG Supplied to promoter companies –GACL, GUVNL, GSFC
Notapplicable
Vadodara-II 160 Gas/RLNG Supplied to GUVNL under PPA 14.0
SLPP – I 250 lignite Supplied to GUVNL under PPA 14.0
SLPP – II 250 lignite Supplied to GUVNL under PPA 14.0
Source: Company, Angel Research
Assured offtake
A major portion of the power generated by GIPCL is sold to Gujarat Urja Vikas
Nigam Ltd., which carries out power transmission and distribution in Gujarat.
In the past few years, there has been a significant improvement in the financial
position of GUVNL, which augurs well for GIPCL.
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 thecost-plus model, ensuring RoE of 14% (excl. generation linked incentives) at 75%
and 80% PAF for lignite and gas-based plants. At the CMP of ` 71, the stock is
trading attractively at 0.7x FY2013 P/BV. We have assigned a P/BV of 0.9x on
FY2013 book value to arrive at a target price of ` 93. We maintain our Buy
recommendation on the stock.
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GIPCL | 3QFY2012 Result Update
February 9, 2012 5
Exhibit 6: Change in estimates
(` cr) FY2012 FY2013
Earlier Revised Variation (%) Earlier Revised Variation (%)
Net Sales 1,384 1,429 3.3 1,437 1,567 9.0Operating Exp 923 1,002 8.5 993 1,117 12.4
Operating Profit 461 427 (7.2) 444 450 1.4
Depreciation 166 166 0.0 166 166 0.0
Interest 111 117 5.6 80 106 33.1
PBT 188 157 (16.2) 202 194 (3.9)
Tax 34 28 (16.2) 36 35 (3.9)
PAT 154 129 (16.2) 166 159 (3.9)
Source: Angel Research
Exhibit 7: Key assumptionsFY2012E FY2013E
Earlier Revised Earlier Revised
PLF (%)
Vadodara Station I 72 67 74 74
Vadodara Station II 54 57 54 57
SLPP (I and II) 72 63 76 76
Units generated (MU)
Vadodara Station I 915 851 940 940
Vadodara Station II 757 799 757 799
SLPP (I and II) 3,154 2,759 3,329 3,329
Source: Company, Angel Research
Exhibit 8: One-year forward P/BV
Source: BSE, Company, Angel Research
0
50
100
150
200
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11
Price 0.5x 1x 1.5x 2x
S h
a r e P r i c e ( ` )
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GIPCL | 3QFY2012 Result Update
February 9, 2012 6
Exhibit 9: Recommendation summary
Company Reco. CMP Tgt. Price Upside FY2013E FY2013E FY2011-13E FY2013E FY2013E
(`) (`) (%) P/BV (x) P/E (x) EPS CAGR (%) RoCE (%) RoE (%)
CESC Acc. 279 304 9.0 0.7 6.7 3.7 8.6 10.5GIPCL Buy 71 93 31.0 0.7 6.7 (1.2) 11.1 10.6
NTPC Acc. 180 199 10.5 1.8 14.2 5.7 10.4 13.3
Source: Company, Angel Research
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GIPCL | 3QFY2012 Result Update
February 9, 2012 7
Profit and loss statement
Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Total operating income 936 1,155 939 1,089 1,429 1,567
% chg 17.6 23.5 (18.7) 16.0 31.2 9.6Total Expenditure 683 944 720 777 1,002 1,117
Net Raw Materials 596 849 611 634 814 911
Other Mfg costs 63 73 82 94 123 135
Personnel 24 23 27 49 64 71
EBITDA 253 211 219 312 427 450
% chg 7.2 (16.7) 3.9 42.8 36.8 5.3
(% of Net Sales) 27.0 18.2 23.3 28.7 29.9 28.7
Depreciation & Amort. 88 88 88 125 166 166
EBIT 165 122 131 187 261 284
% chg 12.6 (25.7) 6.9 43.3 39.4 8.7
(% of Net Sales) 17.6 10.6 13.9 17.2 18.3 18.1
Interest & other Charges 51 30 16 70 117 106
Other Income 27 16 14 4 13 16
(% of PBT) 19 15 11 3 8 8
Recurring PBT 140 109 128 121 157 194
% chg (22.7) (22.3) 17.9 (5.7) 30.0 23.3
Extraordinary Expense/(Inc.) - - - - - -
PBT 140 109 128 121 157 194
Tax 38 23 22 (42) 28 35
(% of PBT) 27.1 21.2 16.8 (34.6) 18.0 18.0
Adj. PAT 102 86 107 163 129 159
% chg (44.1) (16.1) 24.5 52.5 (20.8) 23.3
Basic EPS (`) 6.8 5.7 7.1 10.8 8.5 10.5
Fully Diluted EPS (̀ ) 6.8 5.7 7.1 10.8 8.5 10.5
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GIPCL | 3QFY2012 Result Update
February 9, 2012 8
Balance sheet
Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
SOURCES OF FUNDS
Equity Share Capital 151 151 151 151 151 151Reserves& Surplus 986 1,032 1,095 1,214 1,299 1,414
Shareholders’ Funds 1,137 1,183 1,246 1,365 1,450 1,565
Total Loans 681 840 1,064 1,114 1,064 964
Deferred Tax Liability 78 80 76 47 47 47
Total Liabilities 1,896 2,103 2,387 2,525 2,560 2,575
APPLICATION OF FUNDS
Gross Block 1,913 1,928 1,936 3,865 3,865 3,865
Less: Acc. Dep 1,034 1,122 1,210 1,335 1,501 1,667
Net Block 879 806 726 2,530 2,364 2,198
Capital Work-in-Progress 833 1,290 1,755 - 25 75
Goodwill - - - - - -
Investments 141 62 27 30 80 80
Current Assets 330 320 291 373 572 755
Cash 27 3 2 1 111 249
Loans & Advances 53 48 49 67 89 97
Other 251 269 241 304 372 408
Current liabilities 300 388 427 418 492 543
Net Current Assets 31 (68) (135) (46) 80 211
Mis. Exp. not written off 13 13 13 11 11 11
Total Assets 1,896 2,103 2,387 2,525 2,560 2,575
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GIPCL | 3QFY2012 Result Update
February 9, 2012 9
Cash flow statement
Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Profit before tax 140 109 128 121 157 194
Depreciation 88 88 88 125 166 166Change in Working Capital 37 75 21 (65) (17) 8
Less: Other income 27 16 14 4 13 16
Direct taxes paid 38 23 23 (7) 28 35
Cash Flow from Operations 201 233 201 184 266 317
(Inc)/ Decin Fixed Assets (486) (473) (436) (209) (25) (50)
(Inc)/ Dec in Investments 120 78 35 (3) (50) -
(Inc)/ Dec in loans and adv. - - - - - -
Other income 27 16 14 4 13 16
Cash Flow from Investing (339) (379) (387) (208) (62) (34)
Issue of Equity - (0) - - - -
Inc./(Dec.) in loans 138 160 224 49 (50) (100)
Dividend Paid (Incl. Tax) 44 39 44 44 44 44
Others (3) (1) (5) (18) - -
Cash Flow from Financing 97 122 185 24 (94) (144)
Inc./(Dec.) in Cash (41) (24) (2) (0) 109 139
Opening Cash balances 68 27 3 2 1 111
Closing Cash balances 27 3 2 1 111 249
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GIPCL | 3QFY2012 Result Update
February 9, 2012 10
Key ratios
Y/E March FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Valuation Ratio (x)
P/E (on FDEPS) 10.5 12.5 10.1 6.6 8.3 6.7P/CEPS 5.6 6.2 5.5 3.7 3.6 3.3
P/BV 0.9 0.9 0.9 0.8 0.7 0.7
Dividend yield (%) 4.1 3.6 4.1 4.1 4.1 4.1
EV/Sales 1.8 1.6 2.3 2.0 1.4 1.1
EV/EBITDA 6.8 9.0 9.8 7.0 4.7 4.0
EV / Total Assets 0.9 0.9 0.9 0.9 0.8 0.7
Per Share Data (`)EPS (Basic) 6.8 5.7 7.1 10.8 8.5 10.5
EPS (fully diluted) 6.8 5.7 7.1 10.8 8.5 10.5
Cash EPS 12.6 11.5 12.9 19.0 19.5 21.5
DPS 2.9 2.6 2.9 2.9 2.9 2.9
Book Value 75.2 78.2 82.4 90.3 95.9 103.5
Dupont Analysis (%)
EBIT margin 17.6 10.6 13.9 17.2 18.3 18.1
Tax retention ratio 72.9 78.8 83.2 134.6 82.0 82.0
Asset turnover (x) 0.5 0.6 0.4 0.4 0.6 0.7
ROIC (Post-tax) 6.9 4.9 4.9 10.3 8.6 9.8
Cost of Debt (Post Tax) 6.12 3.06 1.42 8.69 8.81 8.57
Leverage (x) 0.6 0.7 0.8 0.8 0.8 0.7
Operating ROE 7.3 6.1 7.6 11.6 8.5 10.6
Returns (%)
ROCE (Pre-tax) 9.2 6.1 5.8 7.6 10.3 11.1
Angel ROIC (Pre-tax) 14.3 13.3 18.3 11.9 10.6 12.2
ROE 9.2 7.4 8.8 12.5 9.2 10.6
Turnover ratios (x)
Asset Turnover (Gross Block) 0.5 0.6 0.5 0.4 0.4 0.4
Inventory / Sales (days) 32 27 38 35 31 33
Receivables (days) 53 55 61 57 56 58
Payables (days) 137 133 206 198 166 169
WC cycle (ex-cash) (days) 9 (11) (40) (31) (10) (8)
Solvency ratios (x)Net debt to equity 0.6 0.7 0.8 0.8 0.7 0.5
Net debt to EBITDA 2.6 3.9 4.8 3.5 2.2 1.6
Interest Coverage (EBIT / Int.) 3.2 4.1 8.1 2.7 2.2 2.7
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GIPCL | 3QFY2012 Result Update
February 9, 2012 11
Disclosure of Interest Statement GIPCL
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%)
Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
Disclaimer
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