Godawari Power Q2 Review - EC Approvals Delayed, Long-Term Story Remains Intact; Maintain Buy: Yes Securities

Yes Securities Report

Results Synopsis

Q2 FY25 performance for Godawari Power & Ispat Ltd. was below our estimates, primarily driven by mining activities taking a hit during the quarter due to monsoon rains clubbed with the 0.9 mtpa pellet plants’ maintenance shutdown for about 50 days.

Net revenue from operations decreased by 5.6% QoQ to Rs 12,676 mn, while Ebitda for Q2 FY25 stood at Rs 2,466 million, down 35.6% QoQ and 30.5% YoY. Godawari Power’s mine expansion plans currently await the EC approvals from the state government which now have been delayed from Dec-24 to Q4 FY25.

With global iron ore prices expected to average between $100-110/tonne for the remainder of FY25E, we anticipate pellet realizations to stay in the range of Rs 10,000-11,000/t. Q2 FY25 volumes were impacted by the plant maintenance shutdowns and seasonal monsoon challenges, however, we expect a strong recovery in pellet volumes for H2 FY25.

As production normalises, this should support margin improvements from the Q2 FY25 lows. We project revenue/Ebitda growth for Godawari Power at a CAGR of 12%/32%, over FY24-26E.

The company’s 2.0 million tonnes per annum capacity additions on the pellet front, coupled with planned expansions in iron ore mining, will give Godawari Power a strong foothold in the industry.

Currently trading at 4.5 times FY26E EV/Ebitda, Godawari Power appears undervalued, and we believe that securing the EC approvals for the mining expansion could be transformative, potentially leading to a re-rating of the stock.

We value Godawari Power at 6.5x FY26E EV/Ebitda to arrive at our target price of Rs 275/share.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.