GSPL - 2QFY2013 Result Update - Angel Broking

Gujarat State Petronet's (GSPL) 2QFY2013 volumes continued to decline led by declining production from KG D6. The top-line decreased by 1.3%. Maintain Neutral.

Transmission volumes continue to slide: GSPL's total operating revenues decreased by 1.3% yoy to Rs.277cr mainly due to decline in transmission volumes, partially offset by higher tariffs. Transmission volumes for 2QFY2013 decreased by 18.8% yoy to 28.6mmscmd mainly due to decline in production from KG D6 basin. Transmission tariff, however, grew by 19.6% yoy to Rs.1.0/scm.

Higher other income lifts PAT: The EBIDTA was flat yoy at Rs.256cr mainly due to lower operating expenses. During the quarter, other income rose by 30.1% to Rs.19cr. Also, the tax rate stood decreased to 32.5% in 2QFY2013 compared to 33.6% in 2QFY2012. Hence, the PAT increased by 2.7% yoy to Rs.133cr.

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 a muted volume growth for GSPL during FY2013-14. Further, we expect 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 maintain our Neutral rating on the stock due to anticipated decline in earnings over FY2012-14E.

Source : Equity Bulls

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