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Gujarat State Petronet (GSPT.BO)
Buy Equity Research
Above expectation: Wind power surprise; near term focus on tariffs
What surprised us
GSPL (Gujarat State Petronet Limited) reported 1QFY12 net profit of Rs1.37
bn, up 31% yoy, ahead of our/Bloomberg consensus estimate of Rs 1.21bn/
Rs 1.23bn, primarily owing to earlier than expected ramp-up of the wind
power project which contributed Rs159mn to the top-line vs. our estimate
of Rs60mn and almost all of it flowed down to the bottom-line on account
of tax incentives for such projects. The gas transmission volumes at
36.8mmscmd came in marginally higher than our expectation of
35.6mmscmd reflecting additional volumes of imported LNG during the
quarter. The average transmission tariff at Rs813/tscm was up 3% yoy and
higher than our estimate of Rs 790/tscm.
What to do with the stock
We maintain our Buy rating on GSPL with a 12-month DCF-based target
price of Rs120, implying a potential upside of 17% from the current price
level. While wind power revenues have surprised this quarter, the
contribution from this segment will subside in 2HFY12E as the wind
season ends leading to lower generation. We believe gas transmission
volume growth from increased LNG imports and sustained transmission
tariffs in the near term would be a key for GSPL to realize the potential
upside. Note that our tariff assumptions imply average return (CROCI) of
about 16% for GSPL from FY12E-15E. Key Risks: 1) Regulation of
transmission tariffs below our forecasts; 2) possible delay in GSPL’s
expansion plans; 3) delay in domestic gas production volumes.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Gujarat State Petronet (GSPT.BO)
Buy Equity Research
Above expectation: Wind power surprise; near term focus on tariffs
What surprised us
GSPL (Gujarat State Petronet Limited) reported 1QFY12 net profit of Rs1.37
bn, up 31% yoy, ahead of our/Bloomberg consensus estimate of Rs 1.21bn/
Rs 1.23bn, primarily owing to earlier than expected ramp-up of the wind
power project which contributed Rs159mn to the top-line vs. our estimate
of Rs60mn and almost all of it flowed down to the bottom-line on account
of tax incentives for such projects. The gas transmission volumes at
36.8mmscmd came in marginally higher than our expectation of
35.6mmscmd reflecting additional volumes of imported LNG during the
quarter. The average transmission tariff at Rs813/tscm was up 3% yoy and
higher than our estimate of Rs 790/tscm.
What to do with the stock
We maintain our Buy rating on GSPL with a 12-month DCF-based target
price of Rs120, implying a potential upside of 17% from the current price
level. While wind power revenues have surprised this quarter, the
contribution from this segment will subside in 2HFY12E as the wind
season ends leading to lower generation. We believe gas transmission
volume growth from increased LNG imports and sustained transmission
tariffs in the near term would be a key for GSPL to realize the potential
upside. Note that our tariff assumptions imply average return (CROCI) of
about 16% for GSPL from FY12E-15E. Key Risks: 1) Regulation of
transmission tariffs below our forecasts; 2) possible delay in GSPL’s
expansion plans; 3) delay in domestic gas production volumes.
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