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Research
Gujarat State Petronet - In line with estimates... - ICICIdirect
Posted On : 2012-08-11 07:09:23( TIMEZONE : IST )
Gujarat State Petronet (GSPL) has declared its Q1FY13 results with revenues at Rs.270 crore (down 6.1% YoY) and PAT at Rs.124.9 crore (down 9.1%). The results are in line with our estimates with transmission tariffs of Rs.0.90/scm in Q1FY13 against Rs.0.81/scm in Q1FY12. However, tariffs declined 5.6% QoQ mainly due to lower take or pay agreements with customers. The transmission volumes remained flat QoQ at 2832.7 mmscm (31.1 mmscmd) in Q1FY13 mainly on account of a decline in volumes from KG-D6 fields, which was offset by higher LNG volumes. We believe the stock is factoring in the move by PNGRB to cut transmission tariffs in future. We maintain our BUY rating on the stock with a price target of Rs.87.
Volume to remain subdued over next two years
We expect GSPL's volumes to decline from 34 mmscmd in FY12 to 31.9 mmscmd and 33.8 mmscmd in FY13E and FY14E, respectively, due to an expected decline in gas production from the KG basin. We expect LNG to have higher contribution in volumes, going forward. The Mehsana-Bhatinda and Bhatinda-Jammu-Srinagar pipelines are expected to add volumes in FY15.
Transmission tariffs of Rs.0.75 per scm, going forward
Post regulation of tariffs by Petroleum and Natural Gas Regulatory Board (PNGRB), we have factored in transmission tariffs of Rs.0.75 per scm in FY13E and FY14E. The stock currently factors in tariffs of Rs.0.65 per scm, going forward. The implementation of tariff revision with retrospective effect remains a risk.
Limited downside risk from current levels
The long term growth story remains intact with volumes set to increase post FY15E as new LNG capacities come on-stream. GSPL would benefit from the recent approval by the government for additional investment in KG-D6 in future. GSPL's stake in GSPC Gas & Sabarmati Gas and the three cross-country pipelines also provide an upside to the stock. We have valued GSPL based on DCF (WACC-11.9%, terminal growth-2%) to arrive at a price target of Rs.87.
