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Gujarat State Petronet
Hold
Analyst meet takeaways - Management banking on LNG supplies
We attended GSPL's analyst meet. Key takeaways from the same include:
** Volume growth: Management has guided for gas transmission volume
to grow by 10mmscmd to 45mmscmd in the next two years, but was silent
on where will the growth come from. We believe that management's guidance is unlikely to be met given that RIL's gas production is not expected
to increase from current levels of c50mmscd for the next 2 years.
** Pipeline tariff: GSPL has filed its tariff with the regulator PNGRB which
the management said is much higher than the average tariff of INR790/'000
scm earned by it in FY11. It does not expect the tariff determined by PNGRB
to be lower than that earned in FY11. We have assumed a tariff of
INR800/'000 scm for GSPL going ahead.
** Capex: Management has guided for a capex of INR60-70bn each year
for the next three years on expanding its pipeline network in Gujarat. GSPL
plans to expand its pipeline network to 2400km by FY12-end from 1900km
in FY11.
** Cross-country pipelines: GSPL has received Letter of Intent (LOI) from
PNGRB for laying three cross-country pipelines of c4000km. GSPL will have
52% stake in the consortium with IOC (26%), BPCL (11%) and HPCL (11%)
being the other partners. GSPL has to finish laying of these pipelines in 36
months or in FY15. Management has guided for a capex of INR122bn for
these pipeline with a likely debt/equity of 70:30. Management expects Equity IRR to be more than 15% for these projects and has guided for levelised
tariff of INR29.92/ 32.64/ 8.95 per mmbtu for Mallavaram-Bhilwara/
Mehsana-Bhatinda/ Bhatinda-Jammu pipelines respectively.
** Gas sourcing for new pipelines: Management has guided for the new
cross-country pipelines to operate at 40% utilisation rate in the first two
years of operation i.e. FY15 and FY16 and at 50% for FY17. It expects gas
supplies for these initial quantities to be met from GSPC's Deen Dayal block
(10mmscmd), greenfield Mundra (5mmtpa) and Pipavav (3mmtpa) LNG terminals, and expansion in Dahej and Hazira LNG terminals. We believe there
is a downside risk to management's guidance on gas supplies.
We rate GSPL a Hold with INR110 TP as we expect gas supplies in India
(including imports) to grow at only a 4% CAGR over FY11-13. This will adversely impact the utilisation of GSPL's expanded pipeline network and we
expect its RoEs to fall from 28% in FY11 to 20% in FY13 as a result of this.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Gujarat State Petronet
Hold
Analyst meet takeaways - Management banking on LNG supplies
We attended GSPL's analyst meet. Key takeaways from the same include:
** Volume growth: Management has guided for gas transmission volume
to grow by 10mmscmd to 45mmscmd in the next two years, but was silent
on where will the growth come from. We believe that management's guidance is unlikely to be met given that RIL's gas production is not expected
to increase from current levels of c50mmscd for the next 2 years.
** Pipeline tariff: GSPL has filed its tariff with the regulator PNGRB which
the management said is much higher than the average tariff of INR790/'000
scm earned by it in FY11. It does not expect the tariff determined by PNGRB
to be lower than that earned in FY11. We have assumed a tariff of
INR800/'000 scm for GSPL going ahead.
** Capex: Management has guided for a capex of INR60-70bn each year
for the next three years on expanding its pipeline network in Gujarat. GSPL
plans to expand its pipeline network to 2400km by FY12-end from 1900km
in FY11.
** Cross-country pipelines: GSPL has received Letter of Intent (LOI) from
PNGRB for laying three cross-country pipelines of c4000km. GSPL will have
52% stake in the consortium with IOC (26%), BPCL (11%) and HPCL (11%)
being the other partners. GSPL has to finish laying of these pipelines in 36
months or in FY15. Management has guided for a capex of INR122bn for
these pipeline with a likely debt/equity of 70:30. Management expects Equity IRR to be more than 15% for these projects and has guided for levelised
tariff of INR29.92/ 32.64/ 8.95 per mmbtu for Mallavaram-Bhilwara/
Mehsana-Bhatinda/ Bhatinda-Jammu pipelines respectively.
** Gas sourcing for new pipelines: Management has guided for the new
cross-country pipelines to operate at 40% utilisation rate in the first two
years of operation i.e. FY15 and FY16 and at 50% for FY17. It expects gas
supplies for these initial quantities to be met from GSPC's Deen Dayal block
(10mmscmd), greenfield Mundra (5mmtpa) and Pipavav (3mmtpa) LNG terminals, and expansion in Dahej and Hazira LNG terminals. We believe there
is a downside risk to management's guidance on gas supplies.
We rate GSPL a Hold with INR110 TP as we expect gas supplies in India
(including imports) to grow at only a 4% CAGR over FY11-13. This will adversely impact the utilisation of GSPL's expanded pipeline network and we
expect its RoEs to fall from 28% in FY11 to 20% in FY13 as a result of this.
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