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GUJARAT STATE PETRONET LTD (GSPL)
PRICE: RS.84 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.92 FY13E P/E: 8.3X
q GSPL's Q3FY12 result is below our estimates. The company reported a
PAT of Rs.1.26 Bn as against our estimate of Rs.1.35 Bn (-7.1%).
q GSPL's bottom line has fallen mainly on account of 1) Lower gas transmission
volumes and 2). Lower revenue from sale of electricity. This was
partly offset due to higher gas transmission tariffs and lower interest
cost.
q In Jan'12, GSPL has signed an agreement with the consortium (led by
Bank of India) to fund the 2,200-km-long gas pipeline project from
Mehsana to Jammu, via Bathinda in Punjab. With the financial closure
project work will commission. The pipeline is expected to transmit more
than 40 million standard cubic meters gas per day (MSCMD). The project,
estimated to cost Rs. 35 Bn, is being implemented by a special purpose
vehicle (SPVs), with 52% stake of GSPL. In this regard, GSPL has formed
two SPVs for setting up new pipelines.
q In FY13E, GSPC (holding company) is expected to import one cargo of
RLNG per month which will improve GSPL's volumes (2.5-3 mmscmd).
q Recent fall in international LNG prices has resulted in higher demand
from refineries and steel plants but demand from power plants is yet to
pick-up.
q We would like to highlight that in Q3FY12 tariffs has increased by 5.9%
YoY and 7.6% QoQ to Rs. 899.2/KSCM. This is primarily due to increased
long distance transportation of gas which typically earns higher gas
transmission charges thereby pulling the averages up.
q Gas transmission volume had fallen by 6.9% QoQ and by 7.3% YoY to
32.8 MMSCMD in Q3FY12, mainly due to fall in domestic supply of gas.
In FY12E, transmission volumes are lower due to lower off take by few
power plants which were undergoing maintenance.
q The Company recorded flat operating margin on sequential basis. In
Q3FY12, the operating margin was 91.9% as against 92.0% in Q2FY12
and 93.8% in Q3FY11.
q From 1st April'10, the Company had changed the depreciation rate on
gas transmission pipeline from 8.33% SLM to 3.17% SLM. Hence, they are
not comparable.
q On a quarterly basis, the Company reported an EPS of Rs.2.24 and CEPS of
Rs.3.06.
q In FY11, PNGRB had granted authorization for setting up the pipeline,
which will be laid from Mallavaram in Andhra Pradesh to Bhilwara in
Rajasthan, Mehsana in Gujarat to Bhatinda in Punjab and Bhatinda to
Jammu. It will have capacity to carry ~ 95 MMSCMD of gas. We believe it
will take at least three years for completion. On a conservative note, we
have not considered this for our valuations.
q Key risk remains in terms of capping of margins by PNGRB at 18% pretax
ROCE. Based on Q3FY12 rates GSPL is earning around 27.5% pretax ROCE.
q We expect GSPL to report an EPS of Rs.9.03 FY12E and Rs.10.10 FY13E. We
believe the RLNG prices will fall from March'12 onwards due to seasonality
which will improve gas transmission volumes.
q The recent correction in the stock price has made the valuations attractive.
Hence, we retain ACCUMULATE rating on GSPL with a revised target
price of Rs. 92/Share (earlier Rs.105).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GUJARAT STATE PETRONET LTD (GSPL)
PRICE: RS.84 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.92 FY13E P/E: 8.3X
q GSPL's Q3FY12 result is below our estimates. The company reported a
PAT of Rs.1.26 Bn as against our estimate of Rs.1.35 Bn (-7.1%).
q GSPL's bottom line has fallen mainly on account of 1) Lower gas transmission
volumes and 2). Lower revenue from sale of electricity. This was
partly offset due to higher gas transmission tariffs and lower interest
cost.
q In Jan'12, GSPL has signed an agreement with the consortium (led by
Bank of India) to fund the 2,200-km-long gas pipeline project from
Mehsana to Jammu, via Bathinda in Punjab. With the financial closure
project work will commission. The pipeline is expected to transmit more
than 40 million standard cubic meters gas per day (MSCMD). The project,
estimated to cost Rs. 35 Bn, is being implemented by a special purpose
vehicle (SPVs), with 52% stake of GSPL. In this regard, GSPL has formed
two SPVs for setting up new pipelines.
q In FY13E, GSPC (holding company) is expected to import one cargo of
RLNG per month which will improve GSPL's volumes (2.5-3 mmscmd).
q Recent fall in international LNG prices has resulted in higher demand
from refineries and steel plants but demand from power plants is yet to
pick-up.
q We would like to highlight that in Q3FY12 tariffs has increased by 5.9%
YoY and 7.6% QoQ to Rs. 899.2/KSCM. This is primarily due to increased
long distance transportation of gas which typically earns higher gas
transmission charges thereby pulling the averages up.
q Gas transmission volume had fallen by 6.9% QoQ and by 7.3% YoY to
32.8 MMSCMD in Q3FY12, mainly due to fall in domestic supply of gas.
In FY12E, transmission volumes are lower due to lower off take by few
power plants which were undergoing maintenance.
q The Company recorded flat operating margin on sequential basis. In
Q3FY12, the operating margin was 91.9% as against 92.0% in Q2FY12
and 93.8% in Q3FY11.
q From 1st April'10, the Company had changed the depreciation rate on
gas transmission pipeline from 8.33% SLM to 3.17% SLM. Hence, they are
not comparable.
q On a quarterly basis, the Company reported an EPS of Rs.2.24 and CEPS of
Rs.3.06.
q In FY11, PNGRB had granted authorization for setting up the pipeline,
which will be laid from Mallavaram in Andhra Pradesh to Bhilwara in
Rajasthan, Mehsana in Gujarat to Bhatinda in Punjab and Bhatinda to
Jammu. It will have capacity to carry ~ 95 MMSCMD of gas. We believe it
will take at least three years for completion. On a conservative note, we
have not considered this for our valuations.
q Key risk remains in terms of capping of margins by PNGRB at 18% pretax
ROCE. Based on Q3FY12 rates GSPL is earning around 27.5% pretax ROCE.
q We expect GSPL to report an EPS of Rs.9.03 FY12E and Rs.10.10 FY13E. We
believe the RLNG prices will fall from March'12 onwards due to seasonality
which will improve gas transmission volumes.
q The recent correction in the stock price has made the valuations attractive.
Hence, we retain ACCUMULATE rating on GSPL with a revised target
price of Rs. 92/Share (earlier Rs.105).
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