Upcoming 1:5 Stock Split & Rs 1.25 Special Dividend: Buy For Target Rs. 1300-1550 But Hold For?

A fully integrated steel firm, Godawari Power & Ispat Limited works throughout the entire steel value chain. The company produces high-value steel products and iron ore pellets in addition to extracting iron ore from its two owned mines. It is well-known for its integrated steel facilities and strong manufacturing abilities, making it a significant participant in the Indian steel sector. In light of the company's announcement of a 1:5 stock split and a Rs. 1.25 special dividend, is this the right time to buy the stock? Let's find out.

Godawari Power Dividend

The Board of Directors, "Approved the proposal for payment of an Special Dividend of Rs.1.25/-(i.e. 25%) per equity share of Rs.5/-each on the entire paid up share capital of the Company comprising of 13,37,94,988 equity shares of the nominal value of Rs.5/-each on the occasion of 25th Anniversary of the Company. The record date for the purpose of payment of Interim Dividend is 17th August 2024 and the payment will be made on or after 28th August, 2024," said Godawari Power & Ispat in a stock exchange filing.

Godawari Power Share Split Date

The Board of Directors, "Approved the proposal for sub-division of equity share of face value of Rs.5/-each of the Company into 5 (Five) equity shares of Re.1/- each, subject to approval of the Shareholders of the Company in ensuing Annual General Meeting. Approved the proposal for alteration of authorized share capital of the Company by altering the existing clause V of the Memorandum of Association of the Company, subject to the approval of shareholders, to change the face value of equity shares from Rs.5/- to Re.I/-per share and consequently increase in the number of equity shares of the Company," Godawari Power informed stock exchanges.

The rationale behind the stock split is to improve the liquidity of the company's share on the stock market and also to facilitate small investors to deal in our shares, said Godawari Power in a regulatory filing.

The expected date/time of the completion of stock split is approximately 2 to 3 months including the time required for seeking approval of the shareholders, as per the company.

Godawari Power Q1 Results

According to the company, a rise in pellet production, sales, and realisation led to a 12% YoY increase in revenues from operations, or Rs. 1,342 Cr. Despite a decline in volumes and finished product realisation, consolidated EBITDA and PAT grew to Rs. 408 Cr. and Rs. 287 Cr. on a year-on-year and quarterly basis, respectively. The buyback of 21.5 lac shares by Godawari Power & Ispat Ltd (GPIL) at a price of Rs. 1,400 per share was completed in July 2024.

In honour of GPIL's 25th anniversary, the BOD granted a special dividend of 25% on the face value of each share, and the Board of Directors also approved sub-division of face value of Rs. 5 per share into 5 equity shares of Rs. 1/- each.

Mr. B.L. Agrawal, Chairman and Managing Director, commenting on results said that "I'm excited to share that the Company has started FY25 with robust performance, with GPIL delivering impressive results for Q1FY25. Net Sales (excluding trading sales), EBITDA and PAT for the quarter showed a significant growth of 12%, 33% and 24% respectively on YoY basis because of the cost savings benefits gained from the debottlenecking capex undertaken by the Company in recent past."

"The company has rewarded the shareholders through Buybacks, Special Dividend and sub-division of shares on the occasion of 25 th Anniversary of the Company. Given our robust net cash position, a strategic capex plan to more than double our iron ore mining, pellets, and integrated steel capacities, enhanced operational efficiencies, cost savings through solar power, the competitive advantage of captive iron ore mines, manufacturing of high-grade pellets and the support from all stakeholders, we are well-positioned to achieve continued excellence for the foreseeable future," B.L. Agrawal further added.

Godawari Power Share Price Target

"Steel and iron products sector player Godawari Power & Ispat Ltd. is currently trading in overbought conditions, as seen from its RSI readings of 67 on the weekly and 87 on the monthly timeframes. Based on the recent price movement, I expect a pullback soon. Notably, the company's PE ratio is 15.23 against the sector PE of 18.52, suggesting undervaluation. Additionally, it has delivered an ROE of 20.32%. However, in the last 52 weeks, the stock has traded between a range of Rs. 554 and 1223, suggesting significant volatility. Regardless, those willing to enter this stock should consider the buying range of Rs. 880-910, targeting the price level of Rs. 1300-1550. They can hold this stock for 2-5 months while closely following the stop loss of Rs. 710," said V.L.A. Ambala, a Research Analyst (SEBI Registered), Co-founder - Stock Market Today (SMT).

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.