Result Update: GIPCL (New plant not stabilized yet; retain 'Buy' on valuations; TP: Rs135); Indotech Tranformers (Some improvement but still in the red; HOLD; TP: Rs245)

Result Update

 

GIPCL

Reco: BUY

CMP: Rs113

Target Price: Rs135

New plant not stabilized yet; retain 'Buy' on valuations

·      GIPCL Q1FY11 results did not include the impact of new plant as it is still not stabilized (operating at 40-50% utilizations)

·      Considering the above fact, results are operationally excellent (PAF +540bps yoy) with APAT growth of 12% yoy

·      Stabilization of new plant remains overhang; likely to start from 1st Sep.; we now assume contribution from Q3FY11E

·      Valuations attractive at 1.2xFY12E Book Value with assured core ROE of 20%; Maintain 'Buy'; Risk - delay in stabilization

 

 

Indotech Transformers

Reco: HOLD

CMP: Rs255

Target Price: Rs245

Some improvement but still in the red

·      Significant improvement qoq with net loss at Rs27mn versus Rs95mn in Q4FY10, yet not in green and upto expectations

·      Revenues up 70% yoy driven by volume growth of 59% yoy - low base impact; at 30% utilizations; to break-even at 45%    

·      Momentum in order inflows continued from the previous quarter with yoy growth of 637% in Q1FY11 but on low base

·      Lower margin assumptions; cut FY11E earnings by 36%; maintain Hold; triggers - order inflows, outsourcing for parent 

 

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