REDUCE maintained on GSPL – TP Rs.73 - Geojit BNP Paribas

- GSPL reported PAT of Rs.133 crores, above estimates due to the take-or-pay nature of contracts.

- Transmission volumes remained at 28.6mmscmd while the average tariff realized was Rs. 990/tcm.

- Volumes declined 7%, QoQ, on the back of low power off-take due to declining plant load factors and delays in key fertiliser projects, like GNFC which is now expected by end-FY13.

- PAT also increased as GSPL did not take a one-time charge as expected. GSPL is still evaluating the PNGRB order on tariffs. Regulatory overhang on city gas entities limits value accretion from GSPL's stakes in GSPC gas and Sabarmati.

- Any upside from the new pipeline JV is excluded from valuations because of the slow progress in project execution and the long gestation of gas supply projects: Mundra LNG, GSPC and RIL's KG basin supply are delayed till at least 2015.

- While GSPC's acquisition of Gujarat Gas will ensure captive volumes to GSPL, this remains a long-term positive and near-term volume concerns prevail.

- We maintain Reduce on GSPL with a Target Price of Rs.73.

- Upside risk: Transmission volume growth, Lower one-off charge.

Source : Equity Bulls

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