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Recommendations India

GIPCL 3QFY2014 performance highlights and results update

February 7, 2014, Friday, 10:51 GMT | 06:51 EST | 16:21 IST | 18:51 SGT
Contributed by Angel Broking

For 3QFY2014, Gujarat Industries Power Company (GIPCL) reported a subdued performance. The top-line declined by 5.7% yoy to Rs.348cr, although it came in better than our expectations. The operating profit declined by 16.6% yoy to Rs.114cr. The Surat Lignite Power Plant [SLPP] station I and SLPP station II both recorded a plant availability factor (PAF) of 91.2% in 3QFY2014 (as compared to 89.0% and 97.6% respectively in 3QFY2013). The PAF for Vadodara station I and II stood at a healthy 97.2% (98.6% in 3QFY2013) and 100.0% (99.9% in 3QFY2013). Consequently the net profit came in at Rs.43cr for the quarter, down by 39.1% yoy as against Rs.70cr in 3QFY2013.
Operational highlights: For 3QFY2014, GIPCL reported a 5.7% yoy decline in its top-line to Rs.348cr, as power generation declined by 18.4% yoy to 1,029MU. The plant load factor (PLF) at Vadodara station I increased to 73.4% (63.8% in 3QFY2013) while at Vadodara station II, it declined sharply to 7.4% (23.7% in 3QFY2013) majorly due to high gas prices and back down instances. Even the SLPP stations I and II reported a decline in PLF yoy at 68.7% (83.6% in 3QFY2013) and 69.8% (91.8% in 3QFY2013), respectively.
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. The power generated by the company has assured off-take through power purchase agreements (PPAs) signed under the cost-plus model, ensuring RoE of 13- 14% (excl. generation linked incentives). However, high gas prices and unavailability of gas is affecting its gas based plants which is resulting backing down instances and a decline in generation. Moreover, even though the company is planning a 300MW Wind project, it seems to have shelved its major 600MW lignite based expansion project. The stock is currently trading at 0.5x FY2015E P/BV; however, keeping the above factors in mind; we recommend a Neutral rating on the stock.