Report

Gujarat State Petronet's Q1FY19 results (Outperformer) - Steady Quarter

Q1FY19 highlights  

  • Reported EBITDA of Rs3.4bn grew 24% yoy, driven by continued strength in transmission volumes to 36.5 mmscmd (+36% yoy, IDFCe 36 mmscmd). The continued strength in RIL/Power sector offtake has driven the volume uptick. Higher tax rate of 41% and a shrp uptick in interest costs (due to GGL stake buy) has however dragged net earnings down to Rs1.4bn, down 5% yoy
  • Beat vs IDFce EBITDA of Rs3.2bn, driven by slight beat in volumes and also blended tariffs of Rs1.14/scm vs estimates of Rs1.12/scm
  • Higher demand from Power (offtake at 5.5mmscmd for Q1) and RIL (offtake at ~10mmscmd) has helped Q1 earnings, with Q2 seeing some moderation from Power, offset by higher demand from CGD/industrial sector.

Key positives: Sharply higher volumes and stronger tariffs.

Key negatives: Higher opex/interest costs.

Impact on financials: FY19/20E EPS revised -12/+6% for FY18/19E to factor higher interest costs, offset by higher volumes. TP revised up to Rs230/sh. 

Valuations & View

The 8% underperformance to the Sensex of GSPL Stock (last 6M) provides a good opportunity to enter the stock, given the stellar performance in FY18 and improved operational prospects for FY19-20E. We see FY19E transmission volumes being boosted by the push back of RIL’s Petcoke gasification project to H2FY19E, torrent power’s offtake of 1.5mmscmd, Ramp up of Essar Steel’s offtake to 1.5-2mmscmd and the persistent power demand over H1FY19. Despite the estimated 5-6 mmscmd reduction from RIL in H2 therefore, we still see average volumes at ~36 mmscmd for FY19E and 37 mmscmd for FY20E (35/36 earlier), with upside risk from higher demand via GSPC Mundra terminal (commissioning estimated in Q2FY19) and commissioning of specific sections of the cross country pipelines over FY20E. With our revised estimates pointing to a 14% CAGR in EPS over FY18-20E and RoE/RoCE of 14.5/16.5% by FY20e, we believe current valuations of 8.7x FY20E EPS / 5.5x EV/E (excluding Rs61/sh of GGL investment value @40% disc to CMP) are compelling. Reiterate Outperformer.

Underlying
Gujarat State Petronet

Gujarat State Petronet Limited (GSPL) is a natural gas infrastructure and transmission company engaged in gas transportation business. The Company is engaged in transmission of natural gas through pipelines on an open access basis from supply points to demand centers. It also generates electricity through windmills. Its segments include Gas Transportation and Windmill. It develops energy transportation infrastructure and connects natural gas supply sources, including liquefied natural gas (LNG) terminals to various markets. It has set up a 52.5 megawatt (MW) Wind Power Project at Maliya Miyana (District-Rajkot), Gorsar, and Adodar (District-Porbandar). Its subsidiaries include GSPL India Gasnet Limited, which is engaged in development of Mehsana-Bhatinda and Bhatinda-Jammu-Srinagar pipeline projects, and GSPL India Transco Limited, which is engaged in the development of Mallavaram-Bhopal-Bhilwara-Vijaipur Pipeline Project. It serves various industries, such as power and fertilizer.

Provider
IDFC Securities
IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions,  both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement  amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

Other Reports on these Companies
Other Reports from IDFC Securities

ResearchPool Subscriptions

Get the most out of your insights

Get in touch