Gujarat State Petronet's Q3FY18 results (Neutral) - Strong growth...in the price
Q3FY18 highlights
- Net earnings at Rs1.8bn up 53% yoy (IDFCe Rs1.8bn), while EBITDA of Rs3bn improved 34% yoy (IDFCe Rs3.1bn), driven by a 26/6% yoy/qoq increase in transmission volumes. The delay in RIL’s petcoke gasification project and some increase in power demand has driven the increase.
- Reported tariff of ~Rs1.12/scm, up 3% yoy, in line.. Transmission volumes of 33.5 mmscmd for the quarter, marginally ahead of estimates of 33 mmscmd
- Operating costs of Rs531mn +35% yoy) negatively impacted PAT for the quarter, with EBITDA margins at 85% vs 86% in Q2FY18/ 85% in Q3FY17.
Key positives: Sharply higher volumes.
Key negatives: Higher opex.
Impact on financials: FY18/19E EPS revised up 5/3% for FY18/19E to factor higher volumes. FY20E estimates unchanged. TP revised to Rs225/sh.
Valuations & View:
Gujarat State Petronet’s (GSPL) stock price has outperformed the broader index by ~4.5% (last 6 mths), with the pushback of RIL’s petcoke gasifier to FY18E end, commissioning of OpAL’s Dahej plant (1.2-1.5 mmscmd gas demand), torrent power starting offtake of ~1.5 mmscmd gas from PLNG’s Dahej terminal and Essar steel’s offtake of 1.5 mmscmd serving to boost medium term prospects for the company. We estimate transmission volumes of ~31 mmscmd in FY18E vs ~25 mmscmd in FY17E). Having said that, we believe given the progress on RIL’s offgas cracker (ROGC) and therefore the imminent reduction of its gas offtake via GSPL (~7-9 mmscmd) volume growth will be muted in FY19E (we estimate 32 mmscmd in FY19E), even though higher LNG availability and benign prices imply this impact will be mitigated over FY19-21E. At CMP, the stock trades at 13.7x FY20E EPS/ 7.8x EV/EBITDA and 1.8x book value, which we believe fairly captures the upsides from 12% CAGR in EPS over FY18-20E. Reiterate Neutral
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.
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