Gujarat State Petronet Ltd. share price target

Gujarat State Petronet's (GSPL) Q2FY21 result was in-line with our estimates where it recorded highest-ever gas transmission volume. Revenue declined by 9.2% YoY to Rs 5.8bn due to lower realization at Rs 1.6/scm, down 10% YoY. Though gas transmission volume crossed pre-Covid level and registered a growth of 1.5% YoY to 39.8mmscmd (+20% QoQ). EBITDA/scm declined to Rs1.04/scm in Q2FY21 from Rs1.21/scm in Q2FY20 due to lower tariff and higher other expenses. Implied tariff fell by 7.2% YoY to Rs 1.24/scm. We are largely keeping estimates unchanged while introduce FY23E financials and expect its volume/revenue/EBITDA to see a CAGR of 9%/10%/13% over...

Due to NGT's 6Mar'19 order to ban the use of coal gasifiers in Morbi region, spurted Gujarat Gas volumes from its industrial belt of Morbi in the previous quarters, however with industrial units starting up and sales reaching 100% Pre Covid levels, volumes from CGD business have revived. We expect GSPL's transmission volumes to increase from H2FY21 from Gujarat Gas volumes, other CGD projects and power sector. Volumes which was subdued from CGD segment in Q1FY21 because of lower...

We initiate coverage with a BUY for a price target of Rs.293 (38% upside) over the next 24 months.

Government of Gujarat has always played a pro-active role in the development of the energy value chain. Gujarat is first state to plan and execute a State-wide Gas Grid on an Open Access Principle and the pipeline grid has been designed as per the highest international standards with inbuilt flexibility to cater to varying loads. GSPL has CrossCountry Natural Gas Transmission pipelines being implemented. GSPL owns and operates the largest Gas Transmission network in Gujarat...

12 August 2020 Overall, Gujarat is expected to have an available capacity of 40mmtpa over the next 2-3 years, up 54% from now. HPCL-Shapoorji is expected to complete its 5mmtpa LNG terminal at Chhara in another 2-3 years. current ~1.5mmtpa) once the Anjar-Chotila pipeline capacity is augmented. The company currently has pipeline capacity of ~42mmscmd. executing partial stretches of Mehsana-Bhatinda (340km) and Mallavaram- Bhilwara (364km) pipelines. Both have capacity of 76-77mmscmd and would enable evacuation of gas from upcoming LNG terminals. GUJS is already transporting ~40-42mmscmd of gas. Even if the last mile pipeline connectivity of Chhara and Swan is executed by other companies, Gujarat State Petronet GUJS has moved to the lower tax rate. As a result, the regulator might cut its tariffs by 10-12% to maintain regulated RoCEs. Additionally, GUJS has two pipeline grids High Pressure (HP) and Low Pressure (LP) with their economic lifetime being defined as 2026 and 2025, respectively.

Gujarat State Petronet's (GSPL) operating revenue for Q1FY21 fell 9.4% YoY to | 464.4 crore on account of a fall in transmission volumes. Transmission volumes fell 13% YoY to 33.3 mmscmd mainly due to lower CGD offtake. EBITDA came in at | 346.2 crore, down 13.9% YoY. Subsequently, PAT was...

Gujarat State Petronet's (GSPL) Q1FY21 profits were slightly better than our estimates owing to lower than expected gas transmission expenses and other expenses. Revenue declined by 9.4% YoY to Rs 4.6bn due to fall in volume by 12.9% YoY to 33.3mmscmd. EBITDA declined by 13.9% YoY to Rs 3.5bn, whereas PAT declined by 3.3% YoY to Rs 33.3bn. Implied tariff remained flattish YoY to Rs1.3/scm. Lower volume was primarily led by 55.5% drop in CNG volumes to 4.7mmscmd followed by 16.4% drop in Refinery/Petchem to 11.3mmscmd and 32% drop from fertilizers industry to 2.66mmscmd. However, on a positive note power sector offtake saw a sharp rise of...

(growth of 13.5% YoY and flat sequentially) in line with our estimates of 37 mmscmd. Tariffs were at Rs 1.75/scm (growth of 20% YoY and degrowth of 3.8% QoQ). Revenue was in line with our estimates. Strong volumes clocked in due to...

8 June 2020 Lower-than-expected volumes and implied tariff led to an EBITDA miss, while lower tax rate helped GSPLs PAT (in-line) during 4QFY20. The QoQ volume decline was primarily led by lower gas offtake from various fertilizer and refining/petchem units due to the nationwide COVID-19 led lockdowns. Despite the COVID-19 impact, FY20 transmission volumes were up 9% YoY to 37.8mmscmd with implied tariff at INR1,379/scm (v/s INR1,455/scm in FY19). There are concerns over tariff reduction for the company, in line with the revised new tax rate and over-utilization of the pipeline. However, the increase in capex (due to capacity expansion) should ensure lesser impact on its tariff. Transmission volume for the quarter stood at 36.8mmscmd (-6% est. +14% YoY), with Implied tariff at INR1,284/scm (-8% est. -12% YoY). Thus, net sales came in at INR4.4b (+1% YoY) and EBITDA at INR3.6b (+8% YoY), both lower than est.

We maintain our conviction on GSPL based on (1) Stable volume growth (+5% CAGR over FY20-22E to 42.5mmscmd) (2) Smoothening of cyclicality in its earnings, post acquisition of a controlling stake in Gujarat Gas (3) Steady cash flows (FCF of Rs 32.80bn over FY20-23E) from transmission business that will turn the company's position to a net cash one. We value the transmission business using Discounted Cash Flow (DCF) at Rs 138/sh (WACC of 10.5% and Terminal growth rate of 0%). To this, we add Rs 115/sh as value of its investments in Gujarat Gas, Sabarmati Gas and other investments to arrive at the target price of Rs 253/sh. We maintain BUY on GSPL though the Q3 PAT missed our estimates. Benign spot LNG prices will continue to (1) Drive volume growth from industrial customers and (2) Encourage RIL to continue using LNG. Our EPS estimates for FY20/21/22E stand at Rs 17.3/19.7/21.3 vs consensus EPS of Rs 28.1/25.7/23.7. Our SOTP based TP is Rs 253/share (consensus TP Rs 272).