2QFY2012 Result Update | Power

October 22, 2011

GIPCL
Performance Highlights
Y/E March (` cr) Net revenue Operating profit OPM (%) Net profit
Source: Company, Angel Research

BUY
CMP Target Price
% chg qoq
(11.5) (26.9) (659) (36.0)

`77 `95
12 Months

2QFY2012
304 95 31.2 28

1QFY2012
343 130 37.8 43

2QFY2011 % chg yoy

214 44 39.0 16 41.9 116.5 (774) 77.5

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Power 1,169 0.5 121/72 15100 10 16,786 5,050 GJIP.BO GIP@IN

For 2QFY2012, GIPCLs bottom line rose by 77.5% yoy to `28cr, in-line with our estimates. Bottom-line growth was aided by higher yoy capacity in 2QFY2012. (The 250MW SLPP station II became commercially operational in September 2010 and, hence, did not contribute to the companys top line in the first two months of 2QFY2011). Further, higher availability factor reported by power generation stations led to higher recovery of fixed costs. Vadodara stations I and II operated at PAF of 97.7% (95.4% in 2QFY2011) and 98.9% (90.7% in 2QFY2011), respectively. SLPP I and II stations operated at PAFs of 78.4% (68.0% in 2QFY2011) and 61.6% (53.2% in 2QFY2011), respectively. We maintain our Buy recommendation on the stock. Higher availability of plants results in healthy 41.9% yoy top-line growth: GIPCL posted top-line growth of 41.9% yoy, driven by higher availability factor even though generation rose only marginally by 3% yoy to 985MU. Modest growth in generation was on account of lower yoy PLFs reported by Vadodara stations I and II. During 2QFY2012, Vadodara I posted PLF of 70.7% (79.3% in 2QFY2011) and Vadodara II posted PLF of 37.3% (56.4% in 2QFY2011). It has to be noted that the second quarter is a seasonally weak quarter on account of the monsoon season (resulting in low demand and affecting mining work) and maintenance activities undertaken by the company. Outlook and valuation: GIPCL is well placed in terms of fuel security, with the entire fuel requirement of 500MW SLPP stations I and II met from captive lignite mines. Further, power generated by the company has assured offtake through PPAs signed under the cost-plus model, ensuring regulated but fixed returns. At the CMP of `77, the stock is trading at 0.7x FY2013 P/BV. We have assigned a P/BV of 0.9x on FY2013 book value to arrive at a target price of `95. We maintain our Buy recommendation on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 58.2 19.1 2.4 20.3

Abs. (%) Sensex GIPCL

3m

1yr

3yr 57.1 63.9

(9.0) (17.2) 1.0 (33.1)

Key financials
Y/E March (` cr) Net sales % chg Net profit % chg OPM (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2010 939 (18.7) 106.8 24.5 23.3 7.1 10.9 0.9 8.8 5.8 2.4 10.2

FY2011 1,089 16.0 163.0 52.5 28.7 10.8 7.2 0.9 12.5 7.6 2.1 7.3

FY2012E 1,384 27.0 153.9 (5.6) 33.3 10.2 7.6 0.8 10.8 11.9 1.5 4.5

FY2013E 1,437 3.8 165.7 7.7 30.9 11.0 7.1 0.7 10.8 11.7 1.3 4.1

V Srinivasan
022-39357800 - Ext 6831 v.srinivasan@angelbroking.com

Sourabh Taparia
022-39357800 - Ext 6815 sourabh.taparia@angelbroking.com

Please refer to important disclosures at the end of this report

GIPCL | 2QFY2012 Result Update

Exhibit 1: 2QFY2012 performance

Y/E March (` cr) Net Sales Fuel Cost (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (% of Sales) Provision for Taxation (% of PBT) Reported PAT PATM (%) EPS (`)
Source: Company, Angel Research

2QFY12
304 164 54.2 13 4.2 31 10.4 209 95 31.2 29 42 0 24 7.9 (4) (15.7) 28 9.1 1.8

1QFY12
343 176 49.0 12 4.8 25 7.2 213 130 37.8 32 41 0 56 19.0 13 (35.7) 43 25.8 2.8

% chg qoq
(11.5) (6.9) 8.4 27.1 (2.1) (26.9) (659)bp (9.5) 1.7 85.7 (57.6) (128.3) (36.0)

2QFY11
214 130 49.0 11 4.8 30 7.2 170 44 39.0 12 27 1 6 19.0 (10) (35.7) 16 25.8

% chg yoy 1HFY12 1HFY11

41.9 26.7 18.3 6.6 22.7 116.5 (774)bp 145.4 54.3 (75.5) 318.8 (62.1) 77.5 647 341 52.7 25 3.8 56 8.7 422 225 34.8 61 84 0 80 12.4 9 11.8 71 10.9 77.5 5 467 292 62.6 18 3.9 48 10.4 359 108 23.1 16 49 2 45 9.6 (13) (28.6) 57 12.3 3.8

% chg
38.6 16.7 34.9 16.2 17.6 108.5 1,166bp 284.2 71.9 (74.0) 79.6

23.2

(36.0)

1.0

23.2

Exhibit 2: Actual vs. Angel estimates (2QFY2012)

(` cr) Net sales Operating profit OPM (%) Net profit Source: Company, Angel Research Actual
304 95 31 28

Estimates
301 105 35 29

Variation (%)
0.8 (10.0) (378)bp (5.6)

Exhibit 3: Performance trend

400 350 300 250 253 214 308 315 343 304 45 40 35 30 20 81 42 15 24 43 28 15 10 5 0 1QFY11 2QFY11 3QFY11 4QFY11 Net Sales Net Profit 1QFY12 2QFY12 OPM (RHS) 25

(` cr)

150 100 50 0

Source: Company, Angel Research

October 22, 2011

(%)

200

GIPCL | 2QFY2012 Result Update

Performance highlights
For 2QFY212, GIPCL reported top-line growth of 41.9% yoy to `304cr, aided by the commissioning of 250MW Surat Lignite Power Plant II station. However, the companys operating margin declined substantially by 774bp yoy to 31.2% due to higher fuel costs as gas prices were higher on a yoy basis. PAF for SLPP station II stood at 61.6% for the quarter. Although PAF for SLPP station II has improved on a yoy basis (53.2% in 2QFY2011), it is still below the levels where fixed charges can be recovered completely. Nevertheless, PAFs were healthy for the remaining plants. Vadodara Station I recorded PAF of 97.7% in 2QFY2012 (95.4% in 2QFY2011) and Vadodara Station II reported PAF of 98.9% (90.7% in 2QFY2011) for the quarter. SLPP station I reported PAF of 78.4% (67.9% in 2QFY2011) for the quarter. Although operating profit grew by 116.5% yoy during the quarter, the companys bottom line rose by a lower 77.5% yoy to `28cr on account of higher interest cost (`29cr in 2QFY2012 vs. `12cr in 2QFY2011).

During the quarter, the companys bottom line was also boosted by negative tax expense of `4cr; however, it was much lower than the negative tax of `10cr in 2QFY2011. Operational highlights
For 2QFY2012, GIPCLs total power generation stood at 985MU, up 3.4% yoy. Power generation at Vadodara station I and II stood at 226MU and 136MU, respectively. SLPP stations I and II generated 366MU and 257MU of power, respectively, during the quarter.

Exhibit 4: PLF of plants

100 80 60 89 80 95 86 84 77 80 83 74 71 66 47 37

(%)
40 20 0 FY2008
Vadodara Station 1 - 145MW

FY2009

FY2010

2QFY2012
SLPP station I SLPP station II

Vadodara Station 2 - 165MW

Source: Company, Angel Research

October 22, 2011

GIPCL | 2QFY2012 Result Update

Investment arguments
Capacity addition to drive growth
SLPP station II (125x2MW), set up at a cost of `1,630cr, was declared commercial in FY2011. Lignite for this station will be procured from the companys captive lignite mines in Mangrol, developed exclusively for the project. This expansion would boost the companys profitability and will significantly improve cash flows going ahead. Currently, the company is in the process of setting up a new 600MW lignite-based power plant in Surat, which includes development of a captive mine. Bids for the project have been invited through International competitive bidding. The bids are currently under evaluation.

Exhibit 5: Snapshot of projects

Plant Vadodara-I Vadodara-II SLPP I SLPP II Capacity Fuel Type (MW) 145 Gas/RLNG 160 250 250 Gas/RLNG lignite lignite Off-take arrangement Supplied to promoter companies GACL, GUVNL, GSFC Supplied to GUVNL under PPA Supplied to GUVNL under PPA Supplied to GUVNL under PPA Guaranteed RoE (%) Not applicable 14.0 14.0 14.0

Source: Company, Angel Research

Improved gas availability

Currently, of the companys overall capacity, 310MW is based on natural gas. Improved gas availability from KG-D6 has provided more fuel security to GIPCL.

Assured offtake
A major portion of the power generated by GIPCL is sold to Gujarat Urja Vikas Nigam Ltd., which carries out power transmission and distribution in Gujarat. In the past few years, there has been a significant improvement in financial position of GUVNL, which augurs well for GIPCL.

Outlook and valuation

GIPCL is well placed in terms of fuel security, with the entire fuel requirement of 500MW SLPP stations I and II met from captive lignite mines. Further, power generated by the company has assured offtake through PPAs signed under the cost-plus model, ensuring regulated but fixed returns. At the CMP of `77, the stock is trading at 0.7x FY2013 P/BV. We have assigned a P/BV of 0.9x on FY2013 book value to arrive at a target price of `95. We maintain our Buy recommendation on the stock.

October 22, 2011

GIPCL | 2QFY2012 Result Update

Exhibit 6: Change in estimates

(` cr) Earlier Net Sales Operating Exp Operating Profit Depreciation Interest PBT Tax PAT
1549 1106 444 174 79 195 39 156

FY2012 Revised Variation (%)

1384 923 461 166 111 188 34 154 (10.7) (16.5) 3.8 (4.4) 40.0 (3.5) (13.2) (1.1)

FY2013 Earlier
1579 1143 436 174 55 211 42 169

Revised Variation (%)

1437 993 444 166 80 202 36 166 (9.0) (13.1) 1.7 (4.4) 43.7 (4.3) (13.9) (1.9)

Source: Company, Angel Research

Exhibit 7: Key assumptions

FY2012E Earlier PLF (%) Vadodara Station I Vadodara Station II SLPP (I and II) Units sold (MU) Vadodara Station I Vadodara Station II SLPP (I and II)
Source: Company, Angel Research

FY2013E Revised
72 54 72 858 710 2,958

Earlier
80 73 83 953 960 3,389

Revised
74 54 76 882 710 3,122

80 73 80 953 960 3,286

October 22, 2011

GIPCL | 2QFY2012 Result Update

Exhibit 8: One-year forward P/BV

200 Price 0.5x 1x 1.5x 2x

Share Price (`)

150

100

50

0 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11

Source: Company, Angel Research

Exhibit 9: Recommendation summary

Company CESC GIPCL NTPC Reco. Buy Buy Buy CMP (`)
261 77 169

Tgt. Price (`)

383 95 202

Upside (%)
46.7 23.4 19.4

FY2013E P/BV (x)

0.6 0.7 1.7

FY2013E P/E (x)

5.8 7.1 12.5

FY2011-13E EPS CAGR (%)

7.3 0.8 9.2

FY2013E RoCE (%)

9.1 11.7 10.1

FY2013E RoE (%)

11.1 10.8 14.0

Source :Company, Angel Research

October 22, 2011

GIPCL | 2QFY2012 Result Update

Profit and loss statement

Y/E March (` cr) Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel EBITDA % chg (% of Net Sales) Depreciation & Amort. EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) % chg Basic EPS (`) Fully Diluted EPS (`) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 936 17.6 683 596 63 24 253 7.2 27.0 88 165 12.6 17.6 51 27 19 140 (22.7) 140 38 27.1 102 (44.1) 6.8 6.8 1,155 23.5 944 849 73 23 211 (16.7) 18.2 88 122 (25.7) 10.6 30 16 15 109 (22.3) 109 23 21.2 86 (16.1) 5.7 5.7 939 (18.7) 720 611 82 27 219 3.9 23.3 88 131 6.9 13.9 16 14 11 128 17.9 128 22 16.8 107 24.5 7.1 7.1 1,089 16.0 777 634 94 49 312 42.8 28.7 125 187 43.3 17.2 70 4 3 121 (5.7) 121 (42) (34.6) 163 52.5 10.8 10.8 1,384 27.0 923 741 120 62 461 47.4 33.3 166 294 57.1 21.3 111 4 2 188 55.0 188 34 18.0 154 (5.6) 10.2 10.2 1,437 3.8 993 804 124 65 444 (3.7) 30.9 166 278 (5.7) 19.3 80 4 2 202 7.7 202 36 18.0 166 7.7 11.0 11.0

October 22, 2011

GIPCL | 2QFY2012 Result Update

Balance sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Dep Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 1,913 1,034 879 833 141 330 27 53 251 300 31 13 1,896 1,928 1,122 806 1,290 62 320 3 48 269 388 (68) 13 2,103 1,936 1,210 726 1,755 27 291 2 49 241 427 (135) 13 2,387 3,865 1,335 2,530 30 373 1 67 304 418 (46) 11 2,525 3,865 1,501 2,364 25 30 479 32 86 361 464 15 11 2,445 3,865 1,667 2,198 75 30 487 23 89 374 494 (7) 11 2,306 151 986 1,137 681 78 1,896 151 1,032 1,183 840 80 2,103 151 1,095 1,246 1,064 76 2,387 151 1,214 1,365 1,114 47 2,525 151 1,323 1,475 924 47 2,445 151 1,445 1,596 664 47 2,306 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

October 22, 2011

GIPCL | 2QFY2012 Result Update

Cash flow statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments (Inc)/ Dec in loans and adv. Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2008 FY2009 FY2010 140 88 37 27 38 201 (486) 120 27 (339) 138 44 (3) 97 (41) 68 27 109 88 75 16 23 233 (473) 78 16 (379) (0) 160 39 (1) 122 (24) 27 3 128 88 21 14 23 201 (436) 35 14 (387) 224 44 (5) 185 (2) 3 2 FY2011 FY2012E FY2013E 121 125 (65) 4 (7) 184 (209) (3) 4 (208) 49 44 (18) 24 (0) 2 1 188 166 (30) 4 34 286 (25) 4 (21) (190) 44 (234) 31 1 32 202 166 13 4 36 341 (50) 4 (46) (260) 44 (304) (9) 32 23

October 22, 2011

GIPCL | 2QFY2012 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) 0.6 2.6 3.2 0.7 3.9 4.1 0.8 4.8 8.1 0.8 3.5 2.7 0.6 1.9 2.7 0.4 1.4 3.5 0.5 32 53 137 9 0.6 27 55 133 (11) 0.5 38 61 206 (40) 0.4 35 57 198 (31) 0.4 31 57 174 (9) 0.4 34 59 176 (6) 9.2 14.3 9.2 6.1 13.3 7.4 5.8 18.3 8.8 7.6 11.9 12.5 11.9 12.0 10.8 11.7 12.1 10.8 17.6 72.9 0.5 6.9 6.12 0.6 7.3 10.6 78.8 0.6 4.9 3.06 0.7 6.1 13.9 83.2 0.4 4.9 1.42 0.8 7.6 17.2 134.6 0.4 10.3 8.69 0.8 11.6 21.3 82.0 0.6 9.8 8.92 0.7 10.4 19.3 82.0 0.6 9.7 8.22 0.5 10.5 6.8 6.8 12.6 2.9 75.2 5.7 5.7 11.5 2.6 78.2 7.1 7.1 12.9 2.9 82.4 10.8 10.8 19.0 2.9 90.3 10.2 10.2 21.2 2.9 97.5 11.0 11.0 21.9 2.9 105.5 11.4 6.1 1.0 3.8 1.9 7.1 1.0 13.6 6.7 1.0 3.3 1.7 9.5 1.0 10.9 6.0 0.9 3.8 2.4 10.2 0.9 7.2 4.1 0.9 3.8 2.1 7.3 0.9 7.6 3.7 0.8 3.8 1.5 4.5 0.8 7.1 3.5 0.7 3.8 1.3 4.1 0.8 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

October 22, 2011

10

GIPCL | 2QFY2012 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

Disclaimer
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

GIPCL No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 22, 2011

11