Recommendations » India

GIPCL 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Gujarat Industries Power Company (GIPCL)’s operating profit rose by 49.5% yoy to Rs.137cr. The robust operating performance was aided by a favorable base effect (as Surat Lignite Power Plant [SLPP] station II had recorded a lower plant availability factor (PAF) of 61.6% in 3QFY2012 due to technical problems compared to healthy 97.9% in 3QFY2013). PAF for SLPP stations I stood at a healthy 89.0% (83.9% in 3QFY2012) while that for Vadodara station I and II stood at a healthy 98.6% (96.0% in 3QFY2012) and 99.9% (95.0% in 3QFY2012). Consequently the company posted an impressive growth in net profit to Rs.70cr (Rs.17cr in 3QFY2012).

Operational highlights: For 3QFY2013, GIPCL reported a 4.8% yoy decline in top-line to Rs.369cr, largely on account of lower fuel cost (since fuel cost is pass through). During the quarter, the company registered a 6.8% yoy increase in power generation to 1,264BU. Plant load factor (PLF) at Vadodara station I stood at 63.8% (58.6% in 3QFY2012) while SLPP stations I and II reported a higher PLF yoy at 83.6% (78.7% in 3QFY2012) and 91.8% (56.7% in 3QFY2012), respectively. However, lower off-take due to expensive gas led to a sharp decline in PLF of Vadodara station II to 23.7% (67.3% in the corresponding quarter of last year).

Outlook and valuation: GIPCL is well placed in terms of fuel security, with the entire fuel requirement of 500MW SLPP stations I and II being met by captive lignite mines. Further, power generated by the company has assured offtake through power purchase agreements (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, respectively. At the current market price of Rs.70, the stock is trading attractively at 0.6x FY2014E 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.