GSPL (Standalone) - Rating: Hold; Target Price: Rs63 - Centrum

During the quarter, we expect volumes to drop to 20 MMSMCD due to the month-long strike in ceramic industry in Gujarat. Revenue will be adversely impacted as it was a 'force majeure' event and not covered under 'take-or-pay' obligations. The steep decline in volumes YoY is primarily due to the decline of gas supply from RIL KG D6 basin; however, overall revenue downside is limited with the trigger of take-or-pay clause in the GTA.

We expect EBITDA to contract as we factor-in lower volume and higher system-use gas whereas PAT would decline with higher borrowing cost.

During the quarter, gas output from RIL KGD6 basin declined to 10 MMSMCD. In Q2FY14, GSPL reported throughput of 3 MMSCMD from RIL KGD6 to fertiliser units connected to its network. However, the overall gas output decline in RIL KGD6 basin has been swapped by RLNG by fertiliser units and hence is seen as a Neutral event. Going forward, incremental availability of domestic gas and its allocation by GoI will be a key variable.

Source : Equity Bulls

Keywords