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BG stake sale to keep the stock price in check
Gujarat Gas (GGAS) reported dismal set of numbers for Q4CY11 with bottomline
declining by 70.0% YoY and 69.4% QoQ to Rs247mn on the back of rupee
depreciation and higher spot LNG prices. Since GGAS’ entire sourcing is dollar
denominated, rupee depreciation took a toll on the operating performance,
further hampering profitability. The company hiked CNG prices marginally
during the quarter but did not raise prices for other segments. Q1CY12 would
be a better quarter as the company raised prices for all the segments
(industrial retail, PNG etc.) excluding CNG. Devoid of any new natural gas
sourcing, distribution volumes remained stable during CY11 on a YoY basis.
We have thus lowered our earnings for the company and downgraded our
rating to Hold from Buy. However, we believe that the near term stock
performance would be dependent on the pricing for BG stake sale.
Realisations jump sequentially owing to price hikes: GGAS’ revenues
remained almost stable QoQ at Rs6.5bn but average realisations jumped 3.5%
QoQ at Rs20.4./scm due to the full effect of the price hikes effected during
Q3CY11. Distribution volumes declined 3.7% QoQ to 3.4mmscmd due to
seasonality factor.
EBITDA/scm plummets to Rs0.7/scm: GGAS’ Q4 performance was impacted
by over 16% QoQ jump in gas sourcing cost. Gas sourcing cost was higher due
to rupee depreciation and higher spot LNG prices. Since GGAS’ entire gas
sourcing is dollar denominated, the increase in sourcing cost devoid of any
hike in gas prices led to EBITDA/scm declining to Rs0.7/scm from Rs3.3/scm in
Q3 and Rs3.9/scm in Q4CY11. Operating profit thus plummeted by a massive
74.6% QoQ and by 76.8% YoY to Rs300mn.
Higher other income supports bottom-line: Depreciation was in line at
Rs155mn while other income jumped by 86.3% QoQ and 170.0% YoY at
Rs209mn thus supporting the bottom-line. Higher gas sourcing cost led to
GGAS’ worst ever quarterly performance for Q4 with PAT at Rs247mn
declining 69.4% QoQ and 700% YoY.
Stock price to follow news flow on BG stake sale: GGAS’ Q4 performance
was an aberration due to higher natural gas sourcing cost which is likely to
reverse in Q1CY12 as the rupee is appreciating. Spot LNG prices have soothed
and price hikes in industrial retail, PNG etc. are in place. We believe that
concern still exists on gas sourcing as the company has not been able to show
any serious increase in YoY distribution volumes. We have thus lowered our
volume and EBITDA/ scm estimates for CY12E and CY13E. We have thus
downgraded the stock to Hold from Buy based on our new estimates.
However, we believe that the near term stock performance would be
governed by news flow on BG stake sale.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BG stake sale to keep the stock price in check
Gujarat Gas (GGAS) reported dismal set of numbers for Q4CY11 with bottomline
declining by 70.0% YoY and 69.4% QoQ to Rs247mn on the back of rupee
depreciation and higher spot LNG prices. Since GGAS’ entire sourcing is dollar
denominated, rupee depreciation took a toll on the operating performance,
further hampering profitability. The company hiked CNG prices marginally
during the quarter but did not raise prices for other segments. Q1CY12 would
be a better quarter as the company raised prices for all the segments
(industrial retail, PNG etc.) excluding CNG. Devoid of any new natural gas
sourcing, distribution volumes remained stable during CY11 on a YoY basis.
We have thus lowered our earnings for the company and downgraded our
rating to Hold from Buy. However, we believe that the near term stock
performance would be dependent on the pricing for BG stake sale.
Realisations jump sequentially owing to price hikes: GGAS’ revenues
remained almost stable QoQ at Rs6.5bn but average realisations jumped 3.5%
QoQ at Rs20.4./scm due to the full effect of the price hikes effected during
Q3CY11. Distribution volumes declined 3.7% QoQ to 3.4mmscmd due to
seasonality factor.
EBITDA/scm plummets to Rs0.7/scm: GGAS’ Q4 performance was impacted
by over 16% QoQ jump in gas sourcing cost. Gas sourcing cost was higher due
to rupee depreciation and higher spot LNG prices. Since GGAS’ entire gas
sourcing is dollar denominated, the increase in sourcing cost devoid of any
hike in gas prices led to EBITDA/scm declining to Rs0.7/scm from Rs3.3/scm in
Q3 and Rs3.9/scm in Q4CY11. Operating profit thus plummeted by a massive
74.6% QoQ and by 76.8% YoY to Rs300mn.
Higher other income supports bottom-line: Depreciation was in line at
Rs155mn while other income jumped by 86.3% QoQ and 170.0% YoY at
Rs209mn thus supporting the bottom-line. Higher gas sourcing cost led to
GGAS’ worst ever quarterly performance for Q4 with PAT at Rs247mn
declining 69.4% QoQ and 700% YoY.
Stock price to follow news flow on BG stake sale: GGAS’ Q4 performance
was an aberration due to higher natural gas sourcing cost which is likely to
reverse in Q1CY12 as the rupee is appreciating. Spot LNG prices have soothed
and price hikes in industrial retail, PNG etc. are in place. We believe that
concern still exists on gas sourcing as the company has not been able to show
any serious increase in YoY distribution volumes. We have thus lowered our
volume and EBITDA/ scm estimates for CY12E and CY13E. We have thus
downgraded the stock to Hold from Buy based on our new estimates.
However, we believe that the near term stock performance would be
governed by news flow on BG stake sale.
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