Recommendations » India

GSPL 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Gujarat State Petronet (GSPL)’s 3QFY2013 volumes continued to decline led by declining production from KG D6. The top-line and bottom-line decreased by 2.8% and 5.7% yoy, respectively. We maintain our Neutral recommendation on the stock.

Transmission volumes continue to slide: GSPL’s total operating revenues decreased by 2.8% yoy to Rs.266cr, mainly due to a decline in transmission volumes, although the impact was partially offset by higher tariffs. Transmission volumes for 3QFY2013 decreased by 16.0% yoy to 27.56mmscmd whereas transmission tariffs increased by 15.5% yoy to Rs.1/scm.

Higher depreciation drags PAT: The EBIDTA also decreased by 4.9% yoy to Rs.239cr, mainly due to higher operating expenses. Depreciation expenses rose by 3.8% yoy to Rs.48cr. The tax rate declined marginally to 33.0% in 3QFY2013 compared to 33.9% in 3QFY2012. The PAT decreased by 5.7% yoy to Rs.119cr.

Outlook and valuation: We believe GSPL is a leveraged play on increasing gas demand in Gujarat (the country’s hydrocarbon capital) from gas-based power plants and rising spot prices. However, we remain concerned due to declining gas production from the KG-D6 block. Hence, we expect a muted volume growth for GSPL over FY2013-14. Further, we expect average tariff to decline during FY2013-14, compared to FY2012. Hence, although valuations are undemanding for a utility company at 1.2x FY2014E P/BV, we maintain our Neutral rating on the stock due to anticipated decline in earnings over FY2012-14.