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Emkay Global Financial Services has a buy call on Gujarat Industries Power Company with a target price of Rs 137.
The current market price of Gujarat Industries Power Company is Rs 90.55.
Time period given by the brokerage is one year when Gujarat Industries Power Company price can reach the defined target.
View of the brokerage on the company:Annual overhaul at Surat II curtailed generation growth: GIPCL’s Q1FY19 generation increased by 9.2 per cent yoy to 1,127mn units, driven by incremental generation from Wind (76.5mn units) and Solar (44.1mn units).
Generation increased by 9.5 per cent/8.4 per cent yoy in Vadodara I/Surat I units.
However, this was partially offset by a 16.6 per cent yoy decline in generation in the Surat II unit, as the station underwent annual overhaul in Q1FY19.However, revenue increased by only 1.9 per cent yoy to Rs3.3bn (due to 6.7 per cent yoy fall in blended realization to Rs2.9/unit), while fuel cost remained flat.
Employee cost increased by 22.1 per cent yoy to Rs221mn while other expenses jumped by 9.1 per cent yoy due to replacement cost for spare parts in Surat II.
Consequently, reported PAT declined by 8.2 per cent yoy to Rs577mn.
However, after excluding these one-off items, adjusted PAT declined by 3.8 per cent yoy to Rs605mn (below our estimate of Rs706mn).
PLF improves in Surat I Vadodara I; But decline in Surat II: PAF declined across all stations.
It declined to 95 per cent v/s 100 per cent yoy in Vadodara I unit while falling to 80.2 per cent/69.9 per cent in Surat I/Surat II units v/s 84.6 per cent/89.8 per cent yoy.
PLF improved in the Surat I unit to 81.9 per cent v/s 75.6 per cent yoy while it declined in the Surat II unit to 70.1 per cent v/s 84.0 per cent yoy.
PLF of Vadodara I unit remained flat at 55.7 per cent whereas the Vadodara II unit did not generate any power.
In Q1FY19, Wind and Solar capacities operated at PLF of 31.1 per cent and 76.5 per cent, respectively.
TP maintained at Rs137; Reiterate BUY: We have maintained our earnings estimates for FY19/20E and TP of Rs137.
The stock at CMP trades at a very attractive valuation of 0.5x FY20E P/BV.
Thus, we reiterate our BUY rating on GIPCL.
