Please Share::
India Equity Research Reports, IPO and Stock NewsVisit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily28032012.pdf
Light at the end of the tunnel. We revise our rating on GSPL to ADD from REDUCE
after the correction in stock price, noting (1) reasonable valuations at 8.8X FY2013E
earnings and (2) potential upside of 16% from current levels. We remain cautious on
gas transmission volumes in the near term given likely decline in gas supply from KG
D-6 block. However, we expect GSPL’s extant pipeline network to benefit in the long
term from (1) proposed capacity expansion of Dahej and Hazira LNG terminals and
(2) incremental gas supply from RIL’s satellite fields and R-series discovery in KG D-6.
Concerns remain over near-term gas volumes, but situation expected to improve in the long term
We remain concerned about gas transmission volumes in the near term, led by (1) a likely decline
in gas supply from KG D-6 block and (2) unlikely increase in LNG imports from PLNG’s Dahej
terminal (operating at over 110% capacity) before the commissioning of its second jetty by midFY2013E. However, this will be partially offset by incremental spot LNG imports from GSPC
through Shell’s Hazira terminal. In the long term, we believe GSPL’s Gujarat pipeline network will
benefit from increased gas supply, led by (1) proposed expansion of the Hazira terminal by 1.4
mtpa in 2013 and the Dahej terminal by 5 mtpa in 2015 and (2) start of production from RIL’s
satellite fields and R-series discovery in KG D-6 block by 2015-16.
Current stock price factors 13% cut in transmission tariffs versus 9MFY12
Our reverse valuation exercise shows that the stock price factors a potential cut of 13% in
transmission tariffs from current levels. We compute fair value of `75/share for GSPL assuming
average transmission tariffs of `0.74/cu m in FY2013-22E versus implied tariff of `0.85/cu m in
9MFY12. Exhibit 1 shows the current fair valuation of the company at different levels of CROCI
and tariff assumptions. It is possible that PNGRB may allow higher transmission tariffs for GSPL’s
pipeline network (versus our estimate of long-term transmission tariffs of `0.75/cu m), if it were to
assume lower gas volumes in the long term.
Upgrade to ADD rating with unchanged target price of `87; fine-tuned earnings
We revise our rating on GSPL to ADD from REDUCE after the correction in the stock price, noting
(1) reasonable valuations at 8.8X FY2013E earnings and (2) potential upside of 16% to our fair
value from current levels. We maintain our 12-month forward DCF-based target price for GSPL at
`87/share. We have fine-tuned our earnings estimates with (1) modestly lower volumes in
FY2012E and (2) other minor changes. Our EPS estimates remain largely unchanged at `9.2 (-
0.2%) for FY2012E, `8.5 (-0.4%) for FY2013E and `9 (-0.4%) for FY2014E. Key downside risk to
our investment thesis stems from lower-than-expected gas volumes in the long term.
No comments:
Post a Comment