GSPL: Marginally below expectations…:: ICICI Sec

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Marginally below expectations…
GSPL declared its results for Q2FY11, marginally below our estimates
on account of higher administrative and operating expenditure during
the quarter. The company reported revenues of Rs 254.5 crore (flat
YoY), EBITDA of Rs 233.7 crore (down 4.4% YoY) and PAT of Rs 91.5
crore (down 16.9% YoY). Gas transmission tariffs stood at 0.77 per scm
in Q2FY11 in line with our estimates. The gas transmission volume
increased 13.5% YoY from 31.1 mmscmd in Q2FY10 to 35.3 mmscmd in
Q2FY11. We believe supply to Essar, GNFC and Pipavav power plant
would increase its gas transmission volumes in the coming quarters.
We estimate GSPL’s volumes at 37.3 mmscmd and 42.7 mmscmd in
FY11E and FY12E, respectively. The company expects final approval for
authorisation of its pipelines in December 2010 from PNGRB when its
transmission tariffs would be finalised. We estimate gas transmission
tariffs of Rs 0.725 per scm for GSPL from FY12 onwards. GSPL (52%
share) and OMCs (IOC, BPCL, HPCL) JV has recently won bids for
Mallavaram-Bhilwara, Mehsana-Bhatinda pipelines, which would
provide upside to the stock, going forward. Currently, we have not
modelled in these pipelines in our estimates. We recommend a BUY
rating on the stock with a target price of Rs 123.




􀂃 Highlights of the quarter
GSPL reported a 13.5% YoY increase in gas transmission volumes
from 31.1 mmscmd in Q2FY10 to 35.3 mmscmd in Q2FY11 on the
back of increased volumes from RIL KG D6 basin and Petronet LNG.
The gas transmission tariffs declined YoY from Rs 0.89 per scm in
Q2FY10 to 0.77 per scm in Q2FY11. GSPL has also submitted EOI
for Surat-Paradip and Bhatinda-Jammu-Srinagar pipelines, which
would be open for bidding in the next few months.
Valuation
We have valued GSPL based on DCF (WACC-11.2%, terminal growth-2%)
to arrive at a price target of Rs 123. The winning of bids for new areas like
Mallavaram-Bhilwara and Mehsana-Bhatinda pipelines would provide
further upside in the long run.