GSPL - Flattish sequential volumes; tariff notification the only near term catalyst - Centrum

GSPL reported flattish volumes on a sequential basis at 31.1mmscmd despite reduction in KG D6 volumes. Performance in volume terms was better owing to replacement of KG D6 volumes by spot LNG. However, average transmission tariffs declined sequentially from Rs956/'000scm to Rs903/'000scm probably due to short distance transmission. The company is awaiting communication from the PNGRB regulator regarding tariffs. Tariff notification (timing uncertain) remains the only near term catalyst for the stock.

Flattish transmission volumes, average tariffs decline QoQ: GSPL reported better than expected performance in transmission volumes which remained flattish sequentially at 31.1mmscmd despite decline in KG D6 gas volumes. The decline in KG D6 volumes was made up by spot LNG volumes mostly from GSPC. Transmission tariffs however declined QoQ from Rs956/'000scm to Rs903/'000scm probably due to short distance gas transmission.

Depreciation lower, interest costs flat, other income marginally higher: Depreciation declined by 2.9% YoY and 5.7% QoQ at Rs439mn owing to some minor adjustments. Without any addition of debt, the interest cost remained flat at Rs317mn during Q1. Other income witnessed 92.6% YoY and 7.7% QoQ jump at Rs151mn due to income from higher cash balances and investments.

PAT in line: Tax rate jumped to 33.7% during Q1 against 32.0% in Q4FY12 and 29.7% in Q1FY12 thus marginally impacting the bottom-line. Hence, even though the PBT was down 1.0% QoQ and 3.6% YoY, PAT came in at Rs1.25bn, declining by 3.4% QoQ and 9.1% YoY.

Transmission tariff notification remains the only near term catalyst: GSPL's volumes remained flattish QoQ owing to incremental spot LNG volumes primarily from GSPC. Going forward, with further decline expected in KG D6 volumes, GSPL will have to rely more on spot LNG to maintain transmission volumes. Volume uptick is likely to be hindered by stagnant LNG regasification capacity at both PLNG and Shell which will continue in the near term. Thus volume growth can be expected only if volumes from domestic sources increase and LNG re-gasification capacity in Gujarat expands. Devoid of volume growth, transmission tariff notification remains the only catalyst for the stock in the near term. We maintain our 'Neutral' rating on the stock with a price target of Rs75 (based on average of P/E based price target of Rs71 and DCF based price target of Rs79).

Source : Equity Bulls

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