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Research
Gujarat State Petronet - Volumes flat sequentially, valuations continue to remain attractive - Antique Stock Broking
Posted On : 2012-08-21 20:45:48( TIMEZONE : IST )
PAT of INR1.2bn in line with expectation
Gujarat State Petronet Ltd. (GSPL) reported a net profit of INR1,248m in 1QFY13, down 3% QoQ and 9% YoY. Realised transmission tariff was down 6% QoQ but rose 11% YoY to INR903/mcm. Tariffs remained north of INR900/mcm due to take or pay charges and changes in flow distance. Pipeline throughput, though down 15% YoY due to dip in KG-D6 output, remained surprisingly flat QoQ at 31.1mmcmd which we believe is positive. The company reported an EBIT of INR143m on sale of electricity, up 3x YoY. Other expenses fell by 55% YoY and 47% QoQ to INR49m which led to 263bps YoY and 155bps QoQ expansion in EBITDA margin to 98.7% in 1Q.
Volumes expected to remain flat though upsides limited
Gas transmission throughput going forward is likely to remain flat as downsides to KGD6 volumes have been accounted for and even with further decline in output, GSPL's KG-D6 volumes are likely to remain at current levels. However material upsides are also ruled out in the near term due to lack of incremental supplies from domestic sources as well as LNG.
Tariff cut priced in
We assume a tariff of INR730/mcm which would be 13% lower than last three years' average realised tariff of INR840/mcm which would require a pretax write off of INR4.4bn for last four years and post tax write off of INR2.9bn from net worth. This would have an impact of INR5/sh (12%) on FY12 end book value of INR44/sh. However we believe that the stock can throw in positive surprises if tariff comes above expectations. This may also neutralise any retrospective impact which will be further affirmative.
Valuations continue to remain attractive
Excluding value of its investments (in GSPC Gas and Sabarmati Gas) at INR10/share from CMP of INR72/sh, GSPL is trading at an attractive valuation of 1.3x FY14 BV of INR49/sh (post INR5/sh BV erosion due to retrospective effect of a potential tariff cut). We estimate FY14 earnings of INR6.1/sh (32mmcmd transmission volume and a conservative INR730/mcm tariff), which implies 12% ROEs, deserving a higher P/B multiple. We remain positive on GSPL with a target price of INR96 and reiterate our BUY rating.
