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PL Stock Report: Gujarat State Petronet (GUJS IN) - Q2FY24 Result Update – Higher implied tariff drives earnings - BUY
Gujarat State Petronet (GUJS IN) - Swarnendu Bhushan - Co-Head of Research, Prabhudas Lilladher Pvt Ltd.
Gujarat State Petronet (GUJS IN) - Swarnendu Bhushan - Co-Head of Research, Prabhudas Lilladher Pvt Ltd.
Rating: BUY | CMP: Rs273 | TP: Rs328
Q2FY24 Result Update – Higher implied tariff drives earnings
Quick Pointers:
§ Transmission volumes grew 23% YoY to 30.2 mmscmd led by CGD, power and fertilizer segments
§ Implied tariff at Rs 1,587/mscm was down 4% YoY
Gujarat State Petronet (GSPL) reported an EBITDA/PAT of Rs 4.1 bn (+22% Q/Q, PLe: Rs3.6bn) and Rs 5.3 bn (+132% Q/Q, PLe: Rs2.9bn) respectively, aided by a 14.7x QoQ growth in other income to Rs 2.6bn. On a YoY basis, growth in transmission volumes was primarily seen across CGD, fertilizer and power sector. With the moderation in gas prices, commissioning of upcoming LNG terminals and strong domestic demand prospects we remain positive on the long term volume growth of the company with an estimated 11.3% CAGR over FY23-FY26. The stock is trading at 14.6x FY25 P/E and 9.3x FY25 EV/EBITDA. We estimate a 3.5% CAGR in EPS over FY23-26E. The Gujarat government’s dividend distribution, buyback and bonus share policies bode well for shareholders. We assign a ‘Buy’ rating with a TP of Rs 328. Investments in Gujarat Gas (54.2% stake) and Sabarmati Gas (27.5% stake) at a 25% holding discount provide a valuation of Rs 210, and valuing the core business at 7x FY26EPS at Rs 118, we arrive at our TP of Rs 328.
Implied tariff comes in higher: GSPL’s topline came in at Rs 4.5bn, up 15% QoQ. Implied tariff for the quarter came in at Rs1,435/mscm (PLe: Rs 1,374/mscm), up 11% QoQ. EBITDA came in at Rs 4.1bn, up 22% QoQ while PAT grew by 132% QoQ to Rs 5.3bn, mainly due to a higher other income of Rs 2.6bn. On a YoY basis, EBITDA and PAT grew 23% and 69%, respectively. For H1FY24, EBITDA was Rs 7.5bn, up 7.6% YoY while PAT at Rs 7.6bn was up 38.5% YoY.
Sectoral volume performance: Gas supply to city CGD grew 24.6% YoY to 10.8 mmscmd while the power sector volumes grew remarkably by 10x YoY to 4.1 mmscmd. Fertilizer volumes too grew 24.6% YoY to 4.6 mmscmd. However, refinery/petchem volumes declined 30.7% YoY to 5.5 mmscmd. Other volumes grew 34% YoY to 5.2 mmscmd. On a QoQ basis, the total volume grew by 2.8%. CGD/ fertilizer/power/other sector volumes grew 3.9%/33.4%/1.7%/5.8%, respectively. Refinery/petchem volumes witnessed a decline of 16.5% QoQ. Going ahead we anticipate volumes at 35 mmscmd in FY26E.
Company outlook: GSPL is a key beneficiary of lower gas prices. Softer LNG prices (currently at ~US$17/mmBtu) and stable domestic gas prices at US$6.5/mmBtu will help the company increase its transmission volumes. Along with this, increase in LNG capacities and growing domestic demand will aid volume growth for GSPL. We build in a volume growth of 11.3% CAGR over FY23-26E to 35 mmscmd in FY26E. Implied tariff is estimated at Rs 1,402/mscm in FY26E.
