Gujarat State Petronet - 1QFY2013 Result Update - Angel Broking

We resume our coverage on Gujarat State Petronet Ltd (GSPL). For 1QFY2013, GSPL's volumes continued to decline led by declining production from KG D6. The top-line and bottom-line decreased by 5.0% and 9.1% respectively. We recommend a Neutral rating on the stock.

Transmission volumes decline: The total operating revenues decreased 5.0% yoy to Rs.270cr mainly due to a decline in transmission volumes although they were partially offset by higher tariffs. The transmission tariff for 1QFY2013 grew by 11.4% yoy to Rs.0.90/scm. However, transmission volumes decreased by 15.4% yoy to 31.1mmscmd mainly due to a decline in production from the KG D6 basin.

EBITDA and PAT decline led by lower top-line: The EBIDTA decreased by 4.9% yoy to Rs.249cr mainly due to a decline in sales. During the quarter, other income rose by 35.5% to Rs.15cr. However, the tax rate stood increased to 33.7% in 1QFY2013 compared to 29.7% in 1QFY2012. Hence, the PAT decreased by 9.1% yoy to Rs.125cr.

Outlook and valuation: We believe GSPL is a leveraged play on increasing gas demand in Gujarat (the country's hydrocarbon capital) from gas-based power plants and rising spot prices. However, we remain concerned due to declining gas production from the KG-D6 block. Hence, we expect GSPL's volumes to remain flat during FY2013-14. Further, we expect the average tariff to decline during FY2013-14 compared to FY2012. Hence, although valuations are undemanding for a utility company at 1.3x FY2014 P/BV, we recommend a Neutral rating on the stock due to anticipated decline in earnings over FY2012-14E.

Source : Equity Bulls

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