>GIPCL (BONANZA)

HIGHLIGHTS

• There is long term visibility in Power sector in India. Country is likely to remain power deficit for next few years.

• Gujarat, the most industrialized state also has continuously rising demand for power.

• GIPCL is a small Gujarat Govt.PSU with capacity of 557 MW presently, to be expanded to 807 MW by Q2 FY10.

• The company trades at market cap of less than Rs.700 Crore, whereas the average cost of setting 1 MW ranges Rs.3.8 Crore to Rs.5 Crore (i.e. the company of 800MW about Rs.4000 Crore)

• There is easier availability of gas from Domestic suppliers like Reliance and also from international markets.

• The company was earlier lagging in capacity additions, its last capacity addition was in 1999, now it has laid down plans for capacity additions at regular intervals. By FY 2012,it has targeted to achieve capacity of 1350MW.

• Company has healthy debt/Equity ratio of 0.6 times. Power compnies can have Debt/Equity ratio of 70:30, with current Networth of Rs.1140 Crore and Debt. Of Rs.680 Crore, it can easily raise Debt. Of additional Rs. 1980 Crore.

• The company is a regular dividend payer. It paid Rs.2.5/Share dividend in FY08. At CMP Rs.45 it offers Dividend Yield of about 6%

• It has price to Book value of 0.6.

• Company is likely to show fall in bottom line in FY09, compared to FY08, however, once the new capacity starts in next 4months, a sharp jump in results can be seen in FY10. Currently, it is trading at very attractive Market cap/Sales ratio of 0.6 times.

• It is highly under valued compared to peers.

To see full report: GIPCL