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Profitability in line but volumes below estimates…
Gujarat Gas’ revenues for Q1CY11 increased 29% YoY to | 529.1 crore,
marginally below our estimates, mainly on account of lower than
expected gas sales volumes (303 mmscm) for the quarter. EBITDA
margins declined 440 bps YoY to 20.6% on account of higher proportion
of costlier spot LNG purchase by the company. However, the EBITDA per
scm increased by | 0.1 per scm YoY to | 3.6 per scm in Q1CY11. The net
profit for Q1CY11 increased 16.9% YoY to | 72.3 crore on higher margins
per scm. Gujarat Gas has also signed agreements with BG India for the
purchase of RLNG till December 2013. This has improved the visibility in
terms of maintaining the current volumes, going forward. However, we
have reduced our volume estimates to 3.5 mmscmd (1279.3 mmscm) and
3.9 mmscmd (1423 mmscm) in CY11E and CY12E, respectively, to factor
in lower volume growth at higher LNG prices. The gross margins would
continue to remain strong as the company has been able to pass on
higher LNG costs to customers. We estimate CAGR of 23% and 18% in
revenues and net profits, respectively, over CY10-12E. We recommend a
HOLD rating on the stock with a price target of | 387.
Highlights of the quarter
Gujarat Gas reported a 4.1% YoY increase in gas sales volume from 291
mmscm in Q1CY10 to 303 mmscm in Q1CY11. The volume for Gujarat
Gas was ensured by the higher procurement of short-term LNG for the
current quarter. The realisations increased by 24.1% YoY from | 14.1 per
scm in Q1CY10 to | 17.5 per scm in Q1CY11. Gross margins stood at |
4.9 per scm in Q1CY11.
Valuation
The signing of firm contract for LNG would increase its gas sales volume
from 3.32 mmscmd (1212 mmscm) in CY10 to 3.5 mmscmd (1279.3
mmscm) and 3.9 mmscmd (1423 mmscm) in CY11E and CY12E,
respectively. Gujarat Gas is trading at P/BV of 3.3x and RoNW of 25.2% in
CY12E. We have valued the stock based on the DCF methodology (WACC
– 12%, terminal growth - 3%) to arrive at a target price of | 387.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Profitability in line but volumes below estimates…
Gujarat Gas’ revenues for Q1CY11 increased 29% YoY to | 529.1 crore,
marginally below our estimates, mainly on account of lower than
expected gas sales volumes (303 mmscm) for the quarter. EBITDA
margins declined 440 bps YoY to 20.6% on account of higher proportion
of costlier spot LNG purchase by the company. However, the EBITDA per
scm increased by | 0.1 per scm YoY to | 3.6 per scm in Q1CY11. The net
profit for Q1CY11 increased 16.9% YoY to | 72.3 crore on higher margins
per scm. Gujarat Gas has also signed agreements with BG India for the
purchase of RLNG till December 2013. This has improved the visibility in
terms of maintaining the current volumes, going forward. However, we
have reduced our volume estimates to 3.5 mmscmd (1279.3 mmscm) and
3.9 mmscmd (1423 mmscm) in CY11E and CY12E, respectively, to factor
in lower volume growth at higher LNG prices. The gross margins would
continue to remain strong as the company has been able to pass on
higher LNG costs to customers. We estimate CAGR of 23% and 18% in
revenues and net profits, respectively, over CY10-12E. We recommend a
HOLD rating on the stock with a price target of | 387.
Highlights of the quarter
Gujarat Gas reported a 4.1% YoY increase in gas sales volume from 291
mmscm in Q1CY10 to 303 mmscm in Q1CY11. The volume for Gujarat
Gas was ensured by the higher procurement of short-term LNG for the
current quarter. The realisations increased by 24.1% YoY from | 14.1 per
scm in Q1CY10 to | 17.5 per scm in Q1CY11. Gross margins stood at |
4.9 per scm in Q1CY11.
Valuation
The signing of firm contract for LNG would increase its gas sales volume
from 3.32 mmscmd (1212 mmscm) in CY10 to 3.5 mmscmd (1279.3
mmscm) and 3.9 mmscmd (1423 mmscm) in CY11E and CY12E,
respectively. Gujarat Gas is trading at P/BV of 3.3x and RoNW of 25.2% in
CY12E. We have valued the stock based on the DCF methodology (WACC
– 12%, terminal growth - 3%) to arrive at a target price of | 387.
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