Godawari Power & Ispat Ltd. - Excellent performance - Company Update

4QFY26 performance with a miss on revenue but strong beat on margins due to higher pellet contribution, price hikes across all products and increased captive iron ore usage. The long-awaited pellet story has now started reflecting in the financials as the new 2mntpa pellet plant completed its first quarter of operations in Q4FY26 while Ari Dongri mining expansion commenced post receipt of CTO in Feb’26. We continue to remain positive on GPIL’s integrated pellet-led growth strategy supported by higher captive mining, improvement in pellet grade mix, reduction in outsourced iron ore and structural steel along with large diversification non-commodity businesses (CRM and BESS). The management has also approved 1mmt integrated steel plant, which should materially strengthen forward integration over the medium term.  The management has lowered its pellet production and captive iron ore guidance for FY27E, leading to reduction in our EBITDA estimates by 16%. However, the FY28E guidance of full ramp up of pellet plant and start of the new projects of BESS and CRM remains intact, resulting in moderate upward revision in EBITDA estimates (+2.3%) . We increase TP to Rs350 (Rs300 previously), led by increase in valuation multiple and maintain BUY rating.

Strong pellet volumes and price hikes drive robust quarter:

GPIL reported 10% yoy growth in revenue at Rs 16.1bn in 4QFY26, largely driven by strong pellet offtake from the newly commissioned pellet plant along with improved realizations across the steel value chain. For FY26, revenue was flat at Rs 53.8bn.

Margins expand sharply led by improved spreads and mining integration:

EBITDA margins expanded by 558bps yoy and 709bps qoq to 27.3%, leading to EBITDA of Rs 4.4bn; +38% yoy; +91% qoq. Margin expansion was driven by improved spreads, higher share of pellet sales and increased use of captive iron ore post mining expansion approvals. Q4FY26 also benefitted from liquidation of pellet inventory carried from Q3FY26. PAT increased 35% yoy to Rs3bn. For FY26, EBITDA grew by 5% yoy to Rs 12.5bn, translating into margins of 23.3%; +110bps. Adj. PAT was flat at Rs 8.2bn.

Gradual ramp up in pellet story; other growth projects on track:

GPIL has received the EC for mining expansion to 6mntpa from 2.35mntpa in Feb’26, which along with the already started new pellet plant should result in strong pellet sales at optimum margins. GPIL has also approved capex on purchase of wagons to ensure security in logistics for the volume ramp up. Across new businesses, land acquisition is complete for BESS and the new steel plant, while both CRM and BESS are on track for commercial production from Apr’27. The new 250MW solar plant (Q4FY27 commissioning) will supply low-cost power to CRM and later to the Boria Tibu mine, aiding long-term cost competitiveness. However, the management has lowered its pellet production and captive iron ore guidance for FY27E, leading to reduction in our EBITDA estimates by 16%. Nevertheless, the FY28E guidance of full ramp up of pellet plant and start of the new projects of BESS and CRM remains intact, resulting in moderate revision in our EBITDA estimates (+2.3%). We now expect a 62%/ 42%/ 39% CAGR in Rev/ EBITDA/ PAT over FY25-28E on our proforma nos (incl. BESS and CRM estimates). Remain positive on GPIL.

Valuation and risks:

We value GPIL at 9x FY28e EV/EBITDA (8x earlier) to arrive at TP of Rs 350 (Rs 300 previously) and maintain BUY rating. The upward revision in multiple is to account for the addition of non-commodity business i.e. BESS and CRM. Increase in TP is driven by increase in valuation multiple and rollover. At CMP, stock trades at 11.5x/ 7.9x FY27/ FY28E EV/EBITDA. Risks: Commodity price risk, delay in start of BESS and CRM projects.

Company website: https://www.godawaripowerispat.com/

*CMP is as per report published date

Click to download the full Godawari Power & Ispat Ltd. Q4FY26 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Godawari Power & Ispat Ltd. Q4FY26 Company Update

Here are quick answers to common investor queries about the Godawari Power & Ispat Ltd. swing trading opportunity, including entry strategy, targets and key risks.

What drove Godawari Power & Ispat’s Q4FY26 earnings growth?

Growth was driven by higher pellet sales, improved steel realizations, increased captive iron ore usage and strong margin expansion following the ramp-up of the new pellet plant.

Why is the pellet business important for GPIL?

The pellet business improves profitability through better spreads, operational integration and higher captive mining utilization, strengthening GPIL’s long-term earnings visibility.

What are GPIL’s major future growth projects?

Key projects include the integrated steel plant, battery energy storage system (BESS), CRM project, solar power expansion and mining capacity enhancement.

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