GPIL support retest and bounce back
1. Buy or Sell at your own risk
2. Don't risk more than 1%-2% of your capital as stop loss
3. Position Size formula:- Stop Loss Amount/(Buy Price-Initial Stop Loss Price)
4. Sell on initial stop loss hit or daily RSI closing below 40
5. Some other ways to sell stocks can be
a. 25% or 50% up in three weeks or less
b. Weekly tailing tops with high volume
c. Exhaustion gaps
d. Heavy daily volume without further upside
e. Largest one day price drop
After a long consolidation since July 2021, GGPIL gave a high volume breakout on 11th April. On 12th April it retested its support level and bounced back. It is a buy with a stop just below his 432.
Other fundamentals:
1. CRISIL Ratings had upgraded its rating on the long-term bank facilities of GPIL to 'CRISIL A+/Stable’ from ‘CRISIL A/Stable’, and has reaffirmed its ‘CRISIL A1’ rating on the short-term bank facilities.
2. It is expected that GPIL’s credit risk profile will improve in the near term aided by faster-than-anticipated deleveraging. On standalone basis, the company turned term debt free in the second quarter of fiscal 2022 and healthy liquidity is expected to be maintained going forward. As a result, consolidated leverage has improved significantly, as indicated by improvement in debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio of 0.7 times as on March 31, 2021, compared with 2.7 times a year earlier. Operating efficiency should improve further as the entire iron ore requirement will be met through captive mines after ramp up of production on incremental capacity. Additionally, the augmentation of steel-making capacity in the current fiscal will strengthen the market position further.
3. High realisations across the steel industry boosted the performance of GPIL in fiscal 2021 despite disruptions amid the Covid-19 pandemic and the performance is likely to remain strong this fiscal as well. Standalone operating income and operating profit grew by 32% and 139%, respectively, in fiscal 2021, and are likely to further rise in fiscal 2022, as evident from the first quarter financial performance. Operating profitability will structurally improve over the medium term, supported by enhanced backward linkages leading to cost saving, ensuring healthy cash generation.
4. The company has a plan for setting up a greenfield integrated steel plant with capacity of 1.5-2 million tonne (MT) of flat products at estimated capital outlay of around Rs 4,000 crore over the next 3-5 years. The company has initiated the process for land acquisition and other regulatory clearances for setting up the project. Given the initial stage of the project, the structure including the funding mix and other modalities are not yet finalized. According to the management the debt to Ebitda ratio will not exceed 1 time for the entire tenure of the project.
5. The company meets 100% of its power requirement through its captive power capacity of 73 MW (WHRS 42 MW, biomass 20 MW and coal 11 MW) and an additional 25 MW by an arrangement with Jagdamba Power & Alloys Ltd (JPAL; associate company). In addition, the company has coal linkages with Coal India Ltd for around 46% of its requirement. Forward integration has led to diversified products (wire rods, hard bright [HB] wires and pre-fab structures) and revenue profile with the flexibility of selling products based on realisations. Furthermore, efficiency measures, such as setting up an iron ore beneficiation plant (to improve the iron content and thus realisation) and hot rolling mill in the same premises (reduces transportation cost and reheating requirement) and a captive solar photovoltaic plant for increased steel capacity, will improve the operating efficiency and profitability sustainably.
6. Consolidated cash accrual, expected over Rs 1,000 crore in fiscal 2022, will comfortably cover minimal term debt obligation.
7. TTM sales growth at 48% and TTM profit growth at 295%.
8. The company has delivered good profit growth of 55.88% CAGR over last 5 years.
9. Company has a good return on equity (ROE) track record: 3 Years ROE 26.19%.
10. Debt to equity at 0.18 (less than 1 is good), Interest Coverage at 31.4 (greater than 3 is good), Current ratio at 2.25 (greater than 1.5 is good).
11. Debt reduced from ₹2214Cr. in 2017 to ₹469Cr. In September 2021.
2. Don't risk more than 1%-2% of your capital as stop loss
3. Position Size formula:- Stop Loss Amount/(Buy Price-Initial Stop Loss Price)
4. Sell on initial stop loss hit or daily RSI closing below 40
5. Some other ways to sell stocks can be
a. 25% or 50% up in three weeks or less
b. Weekly tailing tops with high volume
c. Exhaustion gaps
d. Heavy daily volume without further upside
e. Largest one day price drop
After a long consolidation since July 2021, GGPIL gave a high volume breakout on 11th April. On 12th April it retested its support level and bounced back. It is a buy with a stop just below his 432.
Other fundamentals:
1. CRISIL Ratings had upgraded its rating on the long-term bank facilities of GPIL to 'CRISIL A+/Stable’ from ‘CRISIL A/Stable’, and has reaffirmed its ‘CRISIL A1’ rating on the short-term bank facilities.
2. It is expected that GPIL’s credit risk profile will improve in the near term aided by faster-than-anticipated deleveraging. On standalone basis, the company turned term debt free in the second quarter of fiscal 2022 and healthy liquidity is expected to be maintained going forward. As a result, consolidated leverage has improved significantly, as indicated by improvement in debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio of 0.7 times as on March 31, 2021, compared with 2.7 times a year earlier. Operating efficiency should improve further as the entire iron ore requirement will be met through captive mines after ramp up of production on incremental capacity. Additionally, the augmentation of steel-making capacity in the current fiscal will strengthen the market position further.
3. High realisations across the steel industry boosted the performance of GPIL in fiscal 2021 despite disruptions amid the Covid-19 pandemic and the performance is likely to remain strong this fiscal as well. Standalone operating income and operating profit grew by 32% and 139%, respectively, in fiscal 2021, and are likely to further rise in fiscal 2022, as evident from the first quarter financial performance. Operating profitability will structurally improve over the medium term, supported by enhanced backward linkages leading to cost saving, ensuring healthy cash generation.
4. The company has a plan for setting up a greenfield integrated steel plant with capacity of 1.5-2 million tonne (MT) of flat products at estimated capital outlay of around Rs 4,000 crore over the next 3-5 years. The company has initiated the process for land acquisition and other regulatory clearances for setting up the project. Given the initial stage of the project, the structure including the funding mix and other modalities are not yet finalized. According to the management the debt to Ebitda ratio will not exceed 1 time for the entire tenure of the project.
5. The company meets 100% of its power requirement through its captive power capacity of 73 MW (WHRS 42 MW, biomass 20 MW and coal 11 MW) and an additional 25 MW by an arrangement with Jagdamba Power & Alloys Ltd (JPAL; associate company). In addition, the company has coal linkages with Coal India Ltd for around 46% of its requirement. Forward integration has led to diversified products (wire rods, hard bright [HB] wires and pre-fab structures) and revenue profile with the flexibility of selling products based on realisations. Furthermore, efficiency measures, such as setting up an iron ore beneficiation plant (to improve the iron content and thus realisation) and hot rolling mill in the same premises (reduces transportation cost and reheating requirement) and a captive solar photovoltaic plant for increased steel capacity, will improve the operating efficiency and profitability sustainably.
6. Consolidated cash accrual, expected over Rs 1,000 crore in fiscal 2022, will comfortably cover minimal term debt obligation.
7. TTM sales growth at 48% and TTM profit growth at 295%.
8. The company has delivered good profit growth of 55.88% CAGR over last 5 years.
9. Company has a good return on equity (ROE) track record: 3 Years ROE 26.19%.
10. Debt to equity at 0.18 (less than 1 is good), Interest Coverage at 31.4 (greater than 3 is good), Current ratio at 2.25 (greater than 1.5 is good).
11. Debt reduced from ₹2214Cr. in 2017 to ₹469Cr. In September 2021.
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