Saturday, September 15, 2012
Companies showing resilience during the tough times of any industry surely deserves special attention.Such companies will out perform in stock market when the fortunes of that particular industry turned around. Godawari Power and Ispat (GPIL) is one such company which is operating mainly in Steel and also in Power.We are aware companies from steel sector is out of favor of the market right now due to various issues like shortage of raw material on account of mining related issues,interruption in power supply and power cuts..etc.Even the demand is also soft now on account of lower construction activities ,we can’t ignore the steel industry as it has a vital role in nation building.GPIL is the flagship company of Raipur based HIRA Group .This is one of the very few companies in steel sector operating in the entire value chain which includes sponge iron, billets, Ferro alloys, captive power, wires rods, steel wires, fly ash brick..etc.Another major factor distinguishing this company from others is the fact that this company is not spending a single rupee for purchasing power from outside .It is fully backed by captive power production facilities and also selling excess power to others .GPIL also having captive mining facilities from two mines allotted for them which is minimizing the uncertainties related with iron ore supply.Now GPIL is increasing its pelletisation capacity from 600000 TPA to 1800000 TPA by setting up new Iron Ore Pellet plant and also setting up 50 MW solar thermal power project at Jaisalmer ,Rajasthan.Financial closure for both these projects already completed and power selling agreement signed with NTPC.In the financial side company is posting excellent performance .In the latest June quarter GPIL posted a sales of Rs.602 Cr an increase of 22% compared with same period last year and a net profit of Rs.51 Cr, almost 65 % increase from last year and an EPS is Rs.15/-. Company also declared a dividend of 25% for FY 2011-12. Promoters having 63% stake in this company .Steel industry is a power intensive one and there is every chance for shortage of power in our country for many years due to slow decision taking process in power industry.In such a situation ,companies backed by full captive power production facilities will get an edge over others.In addition to this, more than 80 % of its iron ore requirements are met by production from captive mines which ensure raw material supply amid tight supply situation due to mining ban and other environmental issues.In nut sell GPIL will be one of the biggest beneficiary of power and iron ore shortage in steel industry.It is one of the best mid cap pick from this sector and eligible to include in your core portfolio with a long term view @ CMP of Rs.117/-. Stock listed both in BSE and NSE.