Ambareesh Baliga, Karvy Stock Broking Vertical integration should improve profitability of Godawari Power & Ispat going ahead. Though its not in a high technology field, it looks cheap from a valuation angle. We are looking at a price of about Rs 140 in about 8-9 months.

Godawari Power & Ispat produces sponge iron, steel billets and wires. It has vertically integrated itself by acquiring mining rights for iron ore, captive coal mines and has set up 28MW power plant. This vertical integration should improve the profitability of the company going ahead. It would also have additional earnings due to carbon credits for the next 10 years. Though the company is not in a high technology field, it is looking cheap from a valuation angle. At current market price of Rs. 107, the stock is trading at 5xFY07 EPS of Rs 21 and about 2.8xFY08 EPS of Rs 38. We are looking at a price of about Rs 140 in about 8-9 months or so. This stock has been in the range of Rs 95 to Rs 115 in the recent past. So a suggested buying price would be closer to Rs 100.