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Guj. Ind. Power: Fuel situation remains grim - Views on News from Equitymaster

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Guj. Ind. Power: Fuel situation remains grim

Sep 8, 2014

Gujarat Industries Power Company (GIPCL) declared its results for the quarter ended June 2014. During the quarter, the company reported an 11% YoY and 33% YoY increase in revenues and profits respectively. Here is our analysis of the results.

Performance summary
  • Revenues grow by 11% YoY during 1QFY15.
  • Operating profits rise by 19% YoY as margins expand to 37.2% from 34.6% in corresponding quarter last year.
  • Lower interest and depreciation charges, coupled with higher other income lead to a one-third rise in profits.

Standalone financial performance
(Rs m) 1QFY14 1QFY15 Change
Net sales 3,130 3,468 10.8%
Expenditure 2,048 2,179 6.4%
Operating profit (EBDITA) 1,082 1,289 19.2%
EBDITA margin (%) 34.6% 37.2%  
Other income  74  90 21.4%
Depreciation  394  388 -1.4%
Interest  230  207 -10.2%
Profit before tax  532  784 47.4%
Tax  168  298 77.8%
Profit after tax/(loss)  364  486 33.4%
Net profit margin (%) 11.6% 14.0%  
No. of shares (m) 151.3 151.3  
Diluted earnings per share (Rs)*   13.1  
Price to earnings ratio (x)   6.6  
(*On a trailing 12-month basis)

What has driven performance in 1QFY15?
  • GIPCL reported a revenue growth of 11% YoY during the quarter ended June 2014. Growth was led by an overall 7% YoY increase in volumes. On a QoQ basis, volumes were lower by about 7%.

  • While the company's plant availability factor (PAF) remained high - ranging from 83% to 100%, the PLFs were quite low and volatile in certain plants. For instance, the PLF of its Vadodara Station-I stood at 66% during the quarter, while that of Station II stood at 2%. PLF's of its Surat plants averaged to about 80% during the quarter.

  • Nevertheless the company's performed well at the profit before tax level as its figure came in higher by 47% YoY led by higher other income and lower interest charges and flat depreciation.
What to expect?
At the current price of Rs 86.5, the stock is trading at a multiple of over 0.7 times its FY14 book value per share.

There has not been much improvement in terms of the situation of the company's fuel requirements. The impact is in the form of lower utilisation rates at its gas based plants. Having said that, the company's stock continues to remain attractive in terms of valuations and all eyes now would be on the fuel related developments. As such we maintain our hold view on the company from a long term perspective.

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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Mar 18, 2019 (Close)


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