MOSL: GUJARAT STATE PETRONET: Volume dip offset by strong tariff
. GUJARAT STATE PETRONET: Volume dip offset by strong tariff
(GUJS IN, Mkt Cap USD1.7b, CMP INR238, TP INR319, 34% Upside, Buy
- GUJS reported an in line 1QFY23, with lower-than-estimated volumes offset by strong tariffs of INR1523/scm, led by use-or-pay contracts as well as change in volume mix on HP/LP networks.
- High spot LNG prices, at USD42/mmbtu, in Jul'22 remain a concern over the strong volume offtake in 2QFY23 as well. Moreover, the shutdown of several Ceramic units, given the high inventory, will impact volume in the near term.
- We remain optimistic about volume growth as long-term growth is expected from CGDs, and the Fertilizer and Refining sectors.
- Phase I of the Mehsana-Bhatinda pipeline has already turned cash flow profitable. Phase II is expected to be commissioned by the end of FY23, following which total volumes through this pipeline should reach 9.5-10mmscmd.
- PNGRB has already taken up a tariff review of GUJS' HPP grid to determine the new tariff and will adjust it for the new tax regime. The proposed capex for FY23 stands at INR45.4b. This will facilitate the transportation of gas from newer LNG terminals and obviate the need for a tariff cut.
- Factoring all of this, we cut our FY23/FY24 volume estimate to 30/42mmscmd and EBITDA estimate by 25%/9%. We maintain our Buy rating.
EBITDA and PAT stood in line
- Total volumes came in below our estimate at 29.5mmscmd, down 20% YoY and flat QoQ.
- EBITDA was in line at INR3.6b, down 4% YoY, but grew 18% QoQ, with implied tariff at INR1,523.
- PAT grew 2% YoY and 17% QoQ to INR2.3b (in line).
Sectoral volume details
- CGD volumes fell 1% YoY and 4% QoQ to 10.9mmscmd.
- Fertilizer volumes rose 29% YoY, but fell 4% QoQ to 3.3mmscmd.
- Power/ref-petchem volumes grew 61% and 10% QoQ to 1.7mmscmd/9.1mmscmd.
- Volumes from the other segment stood at 4.4mmscmd, down 25% YoY and 14% QoQ.
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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