GSPL (Q1 FY15)

India Infoline News Service | Mumbai |

GSPL reported OPM of 86.8% compared to our estimates of 86.5%. OPM was down 412bps yoy but remained flat on a sequential basis.

CMP Rs80, Target Rs100, Upside 25.0% 
  • Revenues at Rs2.3bn were tad lower than estimates owing to lower than expected realizations while volumes were better than estimates

  • Volumes were at 22.5mmscmd for Q1 FY15 as compared to our estimates of 20.8mmscmd

  • OPM at 86.8% was higher than our estimates of 86.5%, margins were down 412bps yoy due to operating deleverage

  • Decrease in debt levels led to decline in interest expenses on yoy basis

  • We maintain our BUY rating as we expect the gas availability to increase in the country, GSPL will be a major beneficiary; we cut our target price to Rs100

Result table
(Rs m) Q1 FY15 Q1 FY14 % yoy Q4 FY14 % qoq
Qty processed (mmscmd) 22.5 22.4 0.4 20.8 8.2
Qty processed (mmscm) 2,023 2,015 0.4 1,869 8.2
Tariff (Rs/scm) 1.07 1.41 (23.9) 1.19 (10.1)
Net sales 2,309 2,968 (22.2) 2,314 (0.2)
Staff costs (76) (67) 12.9 (59) 28.7
Operations and maintenance (180) (154) 16.7 (160) 12.5
Other expenses (49) (48) 2.0 (87) (43.4)
Operating profit 2,004 2,698 (25.7) 2,008 (0.2)
OPM (%) 86.8 90.9 (412) bps 86.8 1 bps
Depreciation (469) (458) 2.6 (449) 4.5
Interest (321) (380) (15.6) (319) 0.5
Other income 130 132 (1.0) 145 (10.4)
PBT 1,344 1,992 (32.5) 1,385 (3.0)
Tax (494) (729) (32.2) (471) 5.0
Effective tax rate (%) 36.8 36.6 34.0
PAT 850 1,263 (32.7) 914 (7.0)
PAT margin (%) 36.8 42.5 (574) bps 39.5 (270) bps
Ann. EPS (Rs) 6.0 9.0 (32.7) 6.5 (7.0)
Source: Company, India Infoline Research

Revenues tad lower than expectations owing to weak tariffs

During Q1 FY15, GSPL reported revenues of Rs2.3bn a fall of 22.2% yoy but flat on a sequential basis. Sales were tad lower than our estimate of Rs2.4bn. Volumes were at 22.5mmscmd compared to our estimates of 20.8mmscmd. Volumes were flat on yoy basis but saw an increase of 8.2% qoq. Sequential recovery in volumes was owing to higher volumes at the Dahej terminal of Petronet LNG while production at KG-D6 field of Reliance Industries remained flat. Tariffs were at Rs1.07/scm a fall of 23.9% yoy and 10.1% qoq. We had built in a tariff of Rs1.2/scm for the quarter. Fall in tariffs was on account of decline in take or pay revenues and also due to increased proportion of shorter distance gas transmission.


Cost analysis
As a % of net sales Q1 FY15 Q1 FY14 bps yoy Q4 FY14 bps qoq
Staff costs 3.3 2.3 102 2.6 74
Operations and maintenance 7.8 5.2 259 6.9 88
Administrative expenses 2.1 1.6 51 3.8 (162)
Total costs 13.2 9.1 412 13.2 (1)
Source: Company, India Infoline Research

Operating margins better than estimates

For Q1 FY15, GSPL reported OPM of 86.8% compared to our estimates of 86.5%. OPM was down 412bps yoy but remained flat on a sequential basis. The key reason for the yoy fall was impact of substantial fall in tariffs. All expenses were higher on a yoy basis. Sequentially, other overheads saw a decline of 43.4% in absolute terms and 162bps as a percentage of net sales. Staff costs and operations & maintenance costs were higher by 74bps and 88bps respectively.

Higher tax rate and lower than expected other income impacts PAT level performance

Operating profit at Rs2bn was tad lower than our estimates by. However, PAT at Rs850mn was lower than our estimates by 7.5%. The underperformance at the PAT level was on the back of 13.2% lower than projected other income and 280bps higher than estimated tax rate. PAT was lower by 32.7% yoy and 7% qoq.


Maintain BUY

We maintain our BUY rating but cut our target price to Rs100. We remain positive on the stock as we believe the worst in terms of volume performance is behind us. KG-D6 production should see some improvement in quarters to come and is expected to gradually increase over the next couple of years. Furthermore, GSPC has tied up spot volumes at Petronet LNG’s Dahej Terminal which will lead to incremental LNG availability in Gujarat. Over the next couple of years volumes should commence from the three cross country pipelines as well.


Financial summary
Y/e 31 Mar (Rs m) FY13 FY14 FY15E FY16E
Revenues 11,732 10,507 10,074 11,333
yoy growth (%) 4.4 (10.4) (4.1) 12.5
Operating profit 10,720 9,288 8,754 9,883
OPM (%) 91.4 88.4 86.9 87.2
Pre-exceptional PAT 5,381 4,191 4,005 4,715
Reported PAT 5,381 4,191 4,005 4,715
yoy growth (%) 3.1 (22.1) (4.5) 17.7
         
EPS (Rs) 9.6 7.4 7.1 8.4
P/E (x) 8.4 10.7 11.2 9.5
Price/Book (x) 1.5 1.4 1.2 1.1
EV/EBITDA (x) 4.7 5.5 6.0 5.3
Debt/Equity (x) 0.5 0.3 0.3 0.3
RoE 19.9 13.4 11.6 12.3
RoCE 22.2 16.9 14.8 15.8
Source: Company, India Infoline Research

***Note: This is a NSE Chart

 

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