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Research
Gujarat State Petronet - Volumes dip further, tariff surprises - ElaraCapital
Posted On : 2013-06-04 20:46:38( TIMEZONE : IST )
PNGRB order implementation leads to tariff surprise
GSPL's Q4FY13 results beat our/Street estimates significantly on the back of one-off retrospective implementation of PNGRB order from Jun'12. While the exact quantum remains undisclosed, we estimate the positive impact to be ~INR1bn. Gas transmission volumes declined to new lows of 22.16mmscmd (down 30% YoY and 21% QoQ) as the domestic gas supplies faltered again in Q4FY13. Excluding the tariff one-off, we estimate the blended tariffs to be around INR1,250/scm and expect this to remain at these levels or higher due to lower volumes at shorter distances leading to higher blended tariffs.
FY13 performance overall, and FY14 outlook
For FY13, GSPL's transmission volumes were down 20% YoY averaging 27.3mmscmd against 34.06mmscmd for FY12. However, this decline was offset by a 30% YoY rise in tariffs which led to a YoY EBITDA growth of 4%. FY13 PAT was up 3% YoY. For FY14, we expect the volumes to average lower at 24mmscmd, while the tariffs should offset this decline partially. We forecast a PAT de-growth of 5.5% for FY14 led by the fall in volumes as we do not expect a sharp revival in domestic gas volumes.
Stock cheap, but may remain cheap with no earnings triggers
As with GAIL, GSPL's stock has suffered heavily in the past two years due to dwindling domestic gas volumes and now trades below a P/E of 7x. As we have mentioned in the past, while GSPL's cash flow valuations may yield attractive values, we do not see any medium term earnings triggers (mainly volume driven) to take the stock up as domestic volume trends are unlikely to reverse in the next one year. With earnings likely to fall in FY14, we do not see GSPL trading above 7x P/E in FY14, but expect the stock to make a floor at the current levels as it now trades at a P/Bv of 1x with a RoE profile of 14-15%. We maintain Reduce rating on GSPL and revise our TP downwards to INR60/sh with a 1-year time horizon.
