GSPL (Q3 FY14)

India Infoline News Service | Mumbai |

Reliance Industries has indicated that the volumes could recover by 3-4mmscmd in FY15.

CMP Rs58, Target Rs60, Upside 3.4%

  • GSPL reported net revenues of Rs2,439mn (lower than our estimates) which were down 8.4% on yoy basis as 26% fall in transmission volumes was partly offset by 23.4% yoy rise in tariffs. On a sequential basis, revenues were lower by 12.1% as volumes and tariffs were down by 4.4% and 5.7% respectively.


  • OPM at 84.4% came in much lower than estimates and were lower by 560bps on yoy basis and 623bps qoq. Costs were higher across the board with more prominent being operations and maintenance costs which jumped 394bps yoy and 278bps qoq as a percentage of net sales. Staff costs were also higher by 104bps yoy and 261bps qoq.


  • While operating profit in Q3 FY14 was lower by 14.1% yoy, PBT was lower by 22.2% yoy. This was owing to 12.1% yoy surge in interest costs and 20.4% yoy fall in other income. 470bps yoy increase in tax rate led to even higher fall at PAT level of 27.6%. PAT was substantially below our estimates.


  • Volumes have been weakening on the back of sustained fall in KG-D6 production. Reliance Industries has indicated that the volumes could recover by 3-4mmscmd in FY15. High LNG prices have also restricted volume growth for LNG importers. While we are estimating 7% and 13% growth in transmission volumes for FY15E and FY16E, earnings growth is expected to be muted. Valuations appear compelling at P/E of 7.1x FY15E EPS but with limited triggers to the stock we downgrade our rating to Market Performer and revise our target price to Rs60.

Cost Analysis
As a % of net sales
Q3 FY14
Q3 FY13
bps yoy
Q2 FY14
bps qoq
Staff costs
4.5
3.4
104
1.9
261
Operations and maintenance
8.3
4.4
394
5.6
278
Administrative expenses
2.8
2.2
62
2.0
84
Total costs
84.4
90.0
(560)
90.6
(623)
Source: Company, India Infoline Research
 
Result table
BSE 204.40 1.25 (0.62%)
NSE 204.00 1 (0.49%)

***Note: This is a NSE Chart

 

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(Rs m)
Q3 FY14
Q3 FY13
% yoy
Q2 FY14
% qoq
Qty processed (mmscmd)
20.7
27.9
(25.8)
21.6
(4.4)
Qty processed (mmscm)
1,861
2,508
(25.8)
1,947
(4.4)
Tariff (Rs/scm)
1.28
1.04
23.4
1.36
(5.7)
Net sales
2,439
2,661
(8.4)
2,774
(12.1)
Staff costs
(109)
(91)
19.5
(52)
111.5
Operations and maintenance
(203)
(117)
73.9
(154)
31.8
Other expenses
(69)
(59)
17.1
(56)
24.6
Operating profit
2,057
2,394
(14.1)
2,513
(18.1)
OPM (%)
84.4
90.0
(560) bps
90.6
(623) bps
Depreciation
(462)
(478)
(3.3)
(470)
(1.6)
Interest