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GSPL – 2QFY2011 Result Update
Angel Broking recommends an Accumulate on GSPL with a Target Price of Rs128
GSPL reported lower-than-expected numbers for 2QFY2011 due to marginally
lower volumes, higher opex and depreciation during the quarter. Bottom-line fell
16.8% yoy to `91.5cr (`110.1cr), which was below our expectation of `98.9cr.
However, given the company’s strong growth potential and attractive valuations,
we recommend Accumulate on the stock.
Transmission volume up, realisation lower: In 2QFY2011, GSPL recorded 0.7%
yoy decline in revenue to `253cr (`255cr), which was marginally above our
expectation of `248cr. Transmission volume, which increased 13.7% yoy to
35.3mmscmd (31.1mmscmd), came in below our expectation of 36mmscmd.
Average transmission realisation decreased 12.7% yoy to `778/’000scm
(`891/’000scm), but was higher than our expectation of `750/’000scm.
Outlook and Valuation: GSPL is a leveraged play on the increasing gas demand
in the country’s hydrocarbon capital, Gujarat. Given the advantage of its location,
GSPL is likely to be the key beneficiary of improving gas supplies in the country
due to the rise in domestic production and LNG imports. We estimate GSPL’s
volume growth to continue on favourable spot gas dynamics. We estimate GSPL's
transmission volume to post 23.6% CAGR over FY2010-12, from 32mmscmd to
48.8mmscmd. Our revised DCF-based Target Price stands at `128 (`120) in a
base case scenario, where we have not assumed 30% PBT sharing with the
Gujarat Government.
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