Buy Godawari Power And Ispat Stock
May 25, 2011 | In: Small Cap Stocks, Stocks To Buy
Godawari Power And Ispat is one of the strongest looking scrips in the small cap space currently. In Q4 FY11 it’s net sales grew 40% YoY to 328 crore versus 234 crore and PAT surged 37% YoY to 31 crore versus 22.55 crore. In the whole year FY11, consolidated revenues were up 36% to 1,116 crore versus 822 crore and consolidated PAT was up 50% to 86 crore versus 57 crore. We saw such kind of numbers despite poor power performance due to low tariff.
GPIL has posted an EPS of 27 for full year FY11 which means the current P/E is about 6.3. FY12 is going to see a decent upsurge in it’s profits due to stabilisation of operations at Ardent Steel which is going to add substantially to volume growth. Brokerages are estimating a growth of about 60 – 70% in the earnings in FY12. The estimated EPS comes to about 45 for FY12 which suggests a one year forward P/E multiple of 3.78 on the current price of 170.
The stock clearly has a good upside left in it and as the market conditions improve, I feel this stock should go up substantially and touch new highs. If the stock can enjoy a P/E multiple of 6 – 7 in this weak market conditions, then I don’t think why the stock cannot maintain similar kind of valuations next year after giving a growth of 60 – 70%. Thus I value the stock at P/E of 7 for FY12 earnings and derive a target price of 315.
Buy Godawari Power and Ispat (cmp: 170) with a target of 315.
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