Gujarat State Petronet - Subsidiary Gujarat Gas drives strong Q3 growth - ICICI Securities

Gujarat State Petronet's (GSPL) Q3FY21 standalone EPS was up 11% YoY driven by rise in volumes. Consolidated Q3 EPS jumped 48% YoY due to 99% YoY surge in EPS of subsidiary Gujarat Gas (GGL). GSPL's transmission volumes are set to fall in Q4 due to surge in spot LNG price in Jan'21. Factoring-in the fall has led to cut in standalone FY21E EPS by 3%. We estimate GSPL's FY22E volumes to be up 10% YoY driven by domestic gas output rise and spot LNG fall from Jan'21 highs. Upgrade in GGL's FY21E-FY22E EPS by 15%-6% has led to upgrade in GSPL's FY21E-FY22E consolidated EPS by 4%-5% and target price by 6% to Rs316 (39% upside). We reiterate BUY on GSPL, a cheaper play on GGL's growth story.

- Standalone Q3 EPS up 11% YoY; rise in consolidated EPS steeper due to surge in GGL's EPS: GSPL's Q3FY21 standalone recurring EPS is up 11% YoY driven by 7% YoY rise in transmission volumes to 39.4mmscmd. Transmission tariff was down 13% YoY to Rs1,592/mscm as transmission expenses fell by 34% YoY to Rs334/mscm. Q3 consolidated recurring EPS was up 48% YoY as subsidiary GGL's recurring consolidated profit surged 99% YoY. 9M standalone recurring EPS was down 4% YoY as volumes and tariff were down 2-6% YoY, while 9M consolidated EPS was up 30% YoY driven by 39% YoY rise in GGL's 9M EPS.

- Raise FY21E-FY22E EPS and target price: Surge in spot LNG price in Jan'21 led to sharp cut in gas volumes by GSPL's largest customer. To factor-in the Q4 volume fall, we have cut GSPL's FY21E transmission volumes by 7% leading to cut in its standalone EPS by 3%. We estimate GSPL's FY22E volumes to rise 10% YoY to 40mmscmd as 7.5-8mmscmd of KG-D6 gas output rise will be transported by GSPL & spot LNG price plunge from Jan'21 high will see volumes recover. Upgrade in GGL's FY21-FY22E EPS by 15%-6% has led to upgrade in GSPL's consol. EPS by 4%-5% in the same years and target price by 6% to Rs316 (39% upside). Downside risk of cut in tariff and GGL being hit by competition being allowed remains.

Shares of GUJARAT STATE PETRONET LTD. was last trading in BSE at Rs.233.3 as compared to the previous close of Rs. 232.95. The total number of shares traded during the day was 72396 in over 1036 trades.

The stock hit an intraday high of Rs. 236 and intraday low of 223.7. The net turnover during the day was Rs. 16745043.

Source : Equity Bulls

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