Gateway Distriparks: improved cost efficiencies

ANALYSTS' CORNER

ILFS Investsmart recommends a "buy" on Gateway Distriparks, in its quarterly results update. The company reported better than expected results at the net level, though net sales increased just marginally.

The profits increased due to improved cost efficiencies despite higher provisioning for taxes. Thus, EBITDA margins have expanded to 66.7 per cent in Q2 FY06 as compared to 60.6 per cent in Q1FY06. It reported revenues and net profit of Rs 36.8 crore and Rs 20.4 crore, a sequential increase of 6.4 per cent and 18.6 per cent, respectively.

The income from operations includes exceptional income of Rs 3.1 crore from ground rent on long-standing containers, which accrues from time to time.

Hence, while this could create quarterly anomalies, it gets evened out from a yearly perspective. The EBITDA margins have shown an improvement of 610 bps due to reduced staff costs and other expenditure like auction expenses.

Neyveli Lignite: keeping the faith

Angel Broking recommends a "buy" on Neyveli Lignite. The company witnessed a mere five per cent y-o-y decline in revenues to Rs 719 crore during Q2 FY06 on the back of low extraction of lignite from its mines and consequent lower supply to power plants resulting in decreased generation. Its PLF was at about 78 per cent.

Net Profit stood at Rs 237 crore, down 15.3 per cent y-o-y. It included a one-time item of Rs 110 crore taken in other income. It was profit made on disposal of plant & machinery of the fertiliser, briquetting & carbonisation and process steam plant.

Sales of the lignite and power divisions were lower by three per cent y-o-y to Rs 424 crore and Rs 723 crore, respectively. PBIT, based on segmental results, of the power and lignite divisions declined sharply at Rs 121 crore and Rs 87 crore, respectively.

However, the company has announced huge expansion plans to geographically diversify and augment its lignite mining capacity to 38.6 mtpa along with tripling its power generation capacity in a phased manner.

Based on this, the report expects its revenues to grow at a CAGR of 5.5 per cent and net profits to grow at a CAGR of 4.4 per cent over the FY05-08 period.

Tata Power: powering up

Motilal Oswal Securities maintains its "buy" recommendation on Tata Power. The company reported a net profit of Rs 126 crore for Q2 FY06, up 20 per cent y-o-y against Rs 105 crore (pre-exceptional items) for Q2 FY05.

The reported numbers for Q2 FY05 include Rs 51.4 crore as gains on sale of long-term investments. The improvement in the company' s financial performance is largely being driven by increased generation during Q2 FY06 at 3,420 MUs (up 6.8 per cent y-o-y).

Higher share of hydropower led to lower fuel cost at Rs 1.49 per unit during Q2 FY06, as compared to Rs 1.61 per unit during Q1 FY06.

The report adds that Tata Broadband, sold to VSNL at an enterprise value of Rs 240 crore, resulting in capital gains of Rs 100 crore plus for Tata Power.

Over the past few months, the company has been divesting its non-core portfolio. The stock trades at a P/R of 16.8x FY06E and 14.9x FY07E.