GSPL- 2Q profit down but cash profit up 14% QoQ:: BofA ML

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Gujarat State Petronet Ltd
2Q profit down but cash profit
up 15% YoY and 14% QoQ
􀂄 2Q profit down 17% YoY but 1H up 3% YoY; Retain Buy
2Q FY11 net profit of Gujarat State Petronet Ltd (GSPL) at Rs915m is 17% YoY
and 13% QoQ lower but its 1H profit is 3% YoY higher. However, GSPL’s 2Q
cash profit is up 15% YoY and 14% QoQ. Volume growth should be modest in
FY11 after the 2.2x jump in FY10 but would be stronger in FY12E. GSPL has won
the bid for two new gas pipelines, which should drive strong growth in the medium
term. We retain Buy on GSPL.
2Q net profit down but cash profit up 14-15% QoQ & YoY
In 2Q FY11 GSPL’s reported profit declined by 17% YoY hit mainly by 29% YoY
higher depreciation. The rise in 2Q depreciation includes that on windmills (over
Rs2bn of capex). Capex on windmills is part of tax planning and has helped cut
tax outflow by 66% YoY in 2Q and 28% YoY in 1H. Lower tax outflow has meant
GSPL’s 2Q cash profit at Rs2bn is 15% YoY and 14% QoQ higher.
2Q volumes up 14% YoY; tariff 13% YoY lower but flat QoQ
2Q EBITDA is 3% YoY lower as 13% YoY decline in tariff neutralized gains from
14% YoY rise in gas transmission volumes. 2Q FY11 volumes at 35.3mmscmd
are 3% QoQ lower as heavy rains reduced demand. GSPL’s 2Q FY11 tariff at
Rs778/mscm is 13% YoY lower but is QoQ flat (1% YoY higher).
Bid for 2 new pipelines won; third bid outcome on Oct 29
The consortium of GSPL (52%) and three R&M companies have won the bid for
1,585km Mallavaram-Bhilwara and 1,670km Mehsana-Bhatinda gas pipelines.
These new pipelines, which are expected to be commissioned in 3 years, would
drive the next phase of strong growth for GSPL. GSPL has also bid for the 740
km Bhatinda-Srinagar pipeline (outcome expected on October 29). GSPL has
also filed expression of interest (EOI) for the 1,680 km Surat-Paradip pipeline.