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Guj. Ind. Power: Some respite in last quarter of FY14 - Views on News from Equitymaster
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  • Jun 10, 2014 - Guj. Ind. Power: Some respite in last quarter of FY14

Guj. Ind. Power: Some respite in last quarter of FY14
Jun 10, 2014

Gujarat Industries Power Company (GIPCL) declared the results for the quarter and year ended March 2014. The company's revenues and profits declined by 3% YoY and 15% YoY respectively during FY14. Here is our analysis of the results.

Performance summary
  • Revenues rise by 18% YoY during 4QFY14.
  • Operating profits rise by 10% YoY during the quarter.
  • Higher other income, coupled with lower interest costs and flat depreciation charges lead to a sharper increase net profits (up 23% YoY).
  • During FY14, revenues and profits decline by 3% YoY and 15% YoY respectively. PBT falls by 12% YoY when adjusted for earlier year's extra ordinary income.
  • Board recommend dividend of Rs 2.5 per share (dividend yield 2.5%)

Standalone financial performance
(Rs m) 4QFY13 4QFY14 Change FY13 FY14 Change
Net sales 3,309 3,899 17.8% 14,160 13,767 -2.8%
Expenditure 1,919 2,376 23.8% 9,756 10,017 2.7%
Operating profit (EBDITA) 1,390 1,523 9.6% 4,404 3,750 -14.9%
EBDITA margin (%) 42.0% 39.1%   31.1% 27.2%  
Other income 53 85 59.4% 143 308 116.0%
Depreciation 390 391 0.2% 562 602 7.1%
Interest 254 210 -17.2% 1,052 883 -16.1%
Exceptional items - -   602 -  
Profit before tax 799 1,007 26.0% 3,535 2,574 -27.2%
Tax 183 248 35.5% 1,347 716 -46.9%
Profit after tax/(loss) 616 759 23.1% 2,189 1,858 -15.1%
Net profit margin (%) 18.6% 19.5%   15.5% 13.5%  
No. of shares (m)       151.3 151.3  
Diluted earnings per share (Rs)*         12.3  
Price to earnings ratio (x)         8.1  
Data Source: Company, Equitymaster Research

What has driven performance in FY14?
  • GIPCL's revenue increased by 18% YoY during the quarter ended March 2014. Growth in revenues was led by a 7% YoY increase in generation volumes. On a QoQ basis, volumes were higher by about 14%. While the company did well to keep its plants' availability high at over 90%, it was the lower power off take that led to lower utilisation of these capacities. For instance, the PLF of its Vadodara Station-I stood at 78% during the quarter, while that of Station II stood at a low 2%. PLF's of its Surat plants averaged to about 85% during the quarter.

  • At the profit before tax level, GIPCL's figure came in higher at 26% YoY led by higher other income coupled with lower interest charges and flat depreciation charges.

  • During FY14, the company's revenues and profits declined by 3% YoY and 15% YoY respectively. During the year, GIPCL's volumes declined by 14% YoY.
What to expect?
At the current price of Rs 99, the stock is trading at a multiple of about 0.85 times its FY14 book value per share.

Not much has changed in terms of operations at GIPCL. While the company continues to do well in terms of keeping its plants available, what has been an issue is the off take in volumes. PLF for the company's Vadodara station-II remains weak. The same fell to 2% in the quarter gone by. For the full year, the plant's PLF fell to 11%. The same stood at 52.1%, 42.3% and 23.9% in FY11, FY12 and FY13 respectively. The company missed our net profit estimate for FY14 by about 12%.

What needs to be gauged is development that happens in terms of gas availability and its prices in the coming future. Not to mention its capacity addition plans. As the company had indicated recently it is looking to set up wind power capacity of 300 MW, while the plan of expanding its Surat plants has been deferred by a few years.

The stock of GIPCL was out of favour for a while, but this seems to have changed in recent times given the preference for stocks from the power space. GIPCL is up by about 60% in the year till date and up by about 45% in the past month. We maintain our ‘Hold' view on the stock.

We would like to reiterate to our subscribers that for the purpose of diversifying risk, no stock should form more than 5% of one's portfolio. Please visit our asset allocation page for more details.

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