CMP Rs120, Target Rs185, Upside 54.2%
Source: Company, India Infoline Research
Also, the company has received a demand of Rs75.8mn from Chhattisgarh State Power Distribution Company relating to cross subsidy on power sold under open access for FY2009- 10. The company has contested the demand and obtained a stay from CSERC. No provision has been made by the company in this regards.
GPIL, over the last three years, has been tactfully changing its business mix to gain maximum profitability. We believe over FY11-13E, power business share would reduce on account of the subdued power tariffs and earnings would be largely driven by its steel business. The loss of production in Ari Dongri in H1 FY12 would be made up in H2 FY12 and the management was strong in achieving its full year target of 0.6mn tons. We believe iron ore mining operations and pellet plant would be the value drivers for the company over the next two years. The stock trades at a P/E of 3.7x & 3.4x and EV/EBIDTA of 4.2x & 4.1x for FY12E and FY13E respectively, which is at a discount to its peers. We maintain our Buy rating on the stock with a revised 9-month price target of Rs185.
Result table (Standalone)