Godawari Power & Ispat’s (GPIL) standalone topline fell by a 34.8% y-o-y to Rs171.8 crore (Rs263.4cr) in 4QFY2009.

This de-growth was on account of a 46% decline in the revenue from the steel division, and due to the production cut undertaken by the company in its Steel Billets and Ferro Manganese segment (for the purpose of increasing the sales volume of the power division).

In 4QFY2009, the company reported a standalone operating profit of Rs20.1 crore (Rs49.1cr), primarily on account of a fall in realisations.

Net Profit on a standalone basis stood at Rs9.7 crore (Rs28.8cr), for the quarter, down 66.2%. This fall was primarily on account of the decline in the operating profit.

We have introduced the FY2011E numbers for the company and expect it to grow its Revenues at a CAGR of 5% and Earnings at a CAGR of 28% over FY2009-11E on the back of a strong volume growth in the Sponge Iron segment, inspite of a slight dip in realisations factored in by us.

We believe that the current stock price does not reflect the backward integration benefits that would accrue over the next two years.

At Rs112, the stock is trading at 3x FY2011E EPS and 0.5x FY2011E P/BV. We maintain a BUY rating, with a revised target price of Rs149 (Rs115).