Religare's Platter: Birla Corp, Gujarat Industries Power
By INDIATIMES NEWS NETWORK |
Birla Corporation
MUMBAI: Religare has recommended ‘buy’ on Birla Corporation for a target price of Rs 501. Birla Corporation, flagship of the MP Birla Group, was established in 1919 with key focus on the cement business. The company has an installed cement production capacity of 5.8 million tonne and aims to expand to 10 million tonne by 2010.
At present, Birla Corporation is carrying out brownfield expansion at its cement plants in Satna, Madhya Pradesh and Chanderia in Rajasthan, which will raise aggregate production capacity to 7 million tonne by 2008-09. Thereafter, the company plans to increase capacity by 3 million tonne via greenfield project with an outlay of Rs 1,200 crore.
With the uptrend in the cement industry, Birla Corporation has performed well over the past few years. The company has recorded net sales CAGR of 17.1 per cent over 2004-2007 to Rs 1,570 crore accompanied by a profit after tax CAGR of 98.7 per cent to Rs 330 crore, Religare says
In April-September 2007-08, the company recorded sales growth of 12.6 per cent over same period last year to Rs 800 crore led by higher price realisations.
The EBITDA margin improved substantially to 36.6 per cent as against 28.1 per cent in H1FY07 and 31.5 per cent in full fiscal FY07, supported by better pricing and cost control. With profit after tax rising 54.4 per cent to Rs 200 crore, Birla Corporation’s earning per share for H1FY08 stands at Rs 26.
Religare expects the company to deliver a topline CAGR of 13.5 per cent over 2007-09 to Rs 2,020 crore with a profit after tax CAGR of 16.2 per cent to Rs 440 crore.
At the current price of Rs 326 the stock trades at 6.5 times on 2007-08 estimated earning per share of Rs 50.1. The target price is based on a price per earning of 10 times on 2007-08 estimate.
MUMBAI: Religare has recommended ‘buy’ on Birla Corporation for a target price of Rs 501. Birla Corporation, flagship of the MP Birla Group, was established in 1919 with key focus on the cement business. The company has an installed cement production capacity of 5.8 million tonne and aims to expand to 10 million tonne by 2010.
At present, Birla Corporation is carrying out brownfield expansion at its cement plants in Satna, Madhya Pradesh and Chanderia in Rajasthan, which will raise aggregate production capacity to 7 million tonne by 2008-09. Thereafter, the company plans to increase capacity by 3 million tonne via greenfield project with an outlay of Rs 1,200 crore.
With the uptrend in the cement industry, Birla Corporation has performed well over the past few years. The company has recorded net sales CAGR of 17.1 per cent over 2004-2007 to Rs 1,570 crore accompanied by a profit after tax CAGR of 98.7 per cent to Rs 330 crore, Religare says
In April-September 2007-08, the company recorded sales growth of 12.6 per cent over same period last year to Rs 800 crore led by higher price realisations.
The EBITDA margin improved substantially to 36.6 per cent as against 28.1 per cent in H1FY07 and 31.5 per cent in full fiscal FY07, supported by better pricing and cost control. With profit after tax rising 54.4 per cent to Rs 200 crore, Birla Corporation’s earning per share for H1FY08 stands at Rs 26.
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Religare expects the company to deliver a topline CAGR of 13.5 per cent over 2007-09 to Rs 2,020 crore with a profit after tax CAGR of 16.2 per cent to Rs 440 crore.
At the current price of Rs 326 the stock trades at 6.5 times on 2007-08 estimated earning per share of Rs 50.1. The target price is based on a price per earning of 10 times on 2007-08 estimate.
Gujarat Industries Power Company
Religare has initiated coverage on the stock with a ‘buy’ recommendation, and one year target of Rs 153.
The Gujarat-based power generation company has an installed capacity of 555MW. It is indirectly promoted by the Gujarat government through various state-owned entities.
Gujarat Industries Power has three power plants in operation. It plans to increase the generation capacity by 1.5 times to 1,305MW by 2011. Of this, 250MW is already under construction and development on another 500MW power plant is expected to begin soon.
The company is set to be a major player in expanding Gujarat's power generation capabilities considering the state's power deficient status and the company's proven execution skills, says Religare.
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Gujarat Industries Power has signed an agreement with the state government for 2x1000MW lignite-based greenfield power plants in south Gujarat.
Gujarat Industries Power’s captive lignite mines, which is sufficient to cater to a 1,000MW power plant for 30 years and proximity to the state gas grid, allows the company to have higher predictability and availability of fuel. This results in higher-than-peer availability and plant load factor for its power plants.
Religare says that the company is trading at a significant discount to industry peers even on considering expansion plans. Using the average of DCF (cost of equity of 12.8 per cent and weighted average cost of capital of 9.2 per cent) and price per book value (1.8 times 2008-09 estimated book value) valuation methods, the brokerage has derived the target price.
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