gipcl result updated

8/3/2019 GIPCL Result Updated

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Please refer to important disclosures at the end of this report

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


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

[email protected]

Sourabh Taparia

022-39357800 - Ext 6815

[email protected]

GIPCL

Performance Highlights

3QFY2012 Result Update | Power

February 9, 2012



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


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)


Exhibit 3: Performance trend


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)




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


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

( % )




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


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.




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


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 ( ` )




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





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




February 9, 2012 8

Balance sheet


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




February 9, 2012 9

Cash flow statement


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




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




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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