Genus Power Infrastructures
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs275
Current market price: Rs110
Price target revised to Rs275
Result highlights
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The Q2FY2009 results of Genus Power Infrastructures Ltd (GPIL) were a mixed bag. While the revenue growth was lower than our estimate, the profit was above our expectation due to a better-than-expected operating performance and a higher other income.
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The net income from operations grew by 18.6% to Rs119.5 crore as against our estimate of Rs127.9 crore. The revenue growth was slower during the quarter due to slower-than-expected execution of project orders. The sales are expected to pick up in Q3FY2009 on the back of faster execution by the company.
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The operating profit of the company was up by 29.9% to Rs22.2 crore resulting in the operating profit margin (OPM) of 18.6% during the quarter. The OPM improved by 162 basis points on a year-on-year (y-o-y) basis mainly due to a decline in the raw material cost as a percentage of sales.
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The other income rose by 82.4% to Rs1.8 crore on account of interest accrual on deposits by the company.
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The interest cost went up sharply by 52.3%, as the company has Rs200 crore of debt on books. The deprecation charge rose by 11.6% to Rs1.5 crore. Consequently, the net profit of the company rose by 27.5% to Rs11.7 crore, ahead of our estimate of Rs10.4 crore.
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The company has an order book of Rs721 crore during Q2FY2009 as against Rs645 crore at the end of Q1FY2009. The company stands “L-1” bidder in works worth Rs1,405 crore.
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We are revising our estimates for the company mainly to reflect a lower revenue growth and a higher interest cost. Consequently we have lowered our profit estimate for FY2009 by 7.1% and that for for FY2010 by 7.5%.
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At the current market price the stock is attractively priced at 2.6x FY2009 fully diluted earnings per share (FDEPS). With a book to bill ratio of 1.5x we believe the current price of the stock does not capture a compounded annual growth rate (CAGR) of 36.9% in the profits over FY2008-10E. We remain positive on the prospects pf the company and recommend a Buy on the stock with a revised price target of Rs275 per share (5x FY2010 FDEPS).
