Gujarat State Petronet

Transcription

1 Result Update Gujarat State Petronet Accumulate results were better than our estimates largely driven by higher than expected volumes. Higher volumes were due to low gas cost and these spot volumes resulted in higher transmission tariffs. The volumes were at 2,904 MMSCM above our estimates of 2,466 MMSCM. Average transportation at ` per SCM. The volume traction has improved in this quarter, though withstand would be crucial. We feel that the key trigger to watch from these levels is the increase in the transportation tariff of long-term volumes. A lot of speculation has been going around regarding the timing and quantum of increase in transportation tariff. We feel if there is a significant increase in transportation tariff, the profitability can rise substantially. GSPL being a pure natural gas transporter does not own the gas at any point in time thereby negating the risk of the fluctuations in the natural gas prices. Tariff hike is expected in Q4FY18. Gujarat accounts for nearly 40% of India s gas consumption and we expect this trend to continue. With the increase in gas supply through RLNG route, GSPL is a natural beneficiary of the increased usage of gas. With a network of around 2,500 km, GSPL is well placed to tap the gas potential of Gujarat. The systemic scale up with widening of the network, committed large industry consumers with Gas Transmission Agreements (GTA) brings the much-needed predictability to GSPL s business model. Result (` Mn) Particulars YoY (%) QoQ (%) Net Sales 3,348 2, , Expenditure Other Expenditure Operating Profit 2,855 2, , Other Income (3.1) Interest (38.9) 106 (14.4) Depreciation PBT 2,605 1, , Tax (3.3) Net Profit 1,770 1, , CMP ` 212 Target / Upside ` 240 /13% BSE Sensex 32,946 NSE Nifty 10,195 Scrip Details Equity / FV ` 5,636 mn/` 10/- Market Cap ` 113bn USD 1.7bn 52-week High/Low ` 223/119 Avg. Volume (no) 11,08,830 NSE Symbol Bloomberg Code Shareholding Pattern Sep 17 (%) GSPL GUJS IN Promoters 37.7 MF/Banks/FIs 18.8 FIIs 17.6 Public / Others 25.9 Valuation (x) FY17 FY18E FY19E P/E EV/EBITDA ROE ROCE Estimates (` mn) FY17 FY18E FY19E Net Sales 10,276 12,497 13,541 EBITDA 8,3 11,070 12,038 PAT 4,966 6,249 7,033 EPS Sr. Analyst: Priyank Chandra Tel: priyank@dolatcapital.com Analyst: Nidhi Doshi Tel: nidhid@dolatcapital.com EPS (in `) OPM (%) NPM (%) Tax Rate (in %) November 14, 2017

2 KPI s ` in Mn YoY (%) QoQ (%) Segment Revenue Gas Transportation 3, , , Sale of Electricity (17.9) (13.0) Gas Transported (in MMSCM) 2,904 2, , Average Tariff (in ` per SCM) (3.9) Gas Transported (in MMSCMD) Valuation GSPL - the largest player in Gujarat and second largest trunk line operator in India has a huge prospect for the company to cash-in the conversion of India from oil consumption to gas consumption. With high FCF yield, we give an Accumulate recommendation with a TP of ` 240/share based on SOTP valuation. We value the core business at ` per share on DCF basis, three transnational pipelines at ` 6 per share and GSPL's stake in Gujarat Gas and Sabarmati Gas at ` 41.5 per share and ` 3 per share respectively. Key highlights Revenue increased by 29.8% on a YoY basis to ` 3,348mn. On a sequential basis, revenue increased by 13%. There was a growth in employee cost of 77.5% on a YoY basis to ` 136mn and a growth of 68.7% on a sequential basis. Other expenditure increased by 47.6% on a YoY basis to ` 357mn. Sequentially it was up by 190%. GSPL made an operating profit of ` 2,855mn in as compared to an operating profit of ` 2,262mn in. This was a growth of 26%. Depreciation increased by 2% on a sequential basis to ` 438mn. Other income decreased by 3.1% YoY to ` 278mn. On a sequential basis, it was up by 69% Net profit increased by 36.3% YoY to ` 1,770mn. This was a growth of 16% on a sequential basis. Gas transportation rose by 28.2% YoY to 31.6 MMSCMD. Average Tariff increased by 3.1% YoY to ` per SCM compared to ` per SCM in. November 14,

3 Q1FY16 Q1FY16 Q1FY16 Q1FY16 OPM (%) NPM (%) Gas Transported (MMSCMD) Average Tariff (Rs. Per SCM) November 14,

4 Income Statement (` mn) Net Sales 9,870 10,169 12,447 13,491 Other Operational income Total Income 9,919 10,276 12,497 13,541 Total Expenditure 1,259 1,393 1,426 1,503 Employee Expenses Other Expenses 898 1, ,012 EBIDTA (Excl. OI) 8,660 8,3 11,070 12,038 EBIDTA (Incl. OI) 9,317 9,765 11,970 13,238 Other Income ,200 Interest Depreciation 1,829 1,791 1,1 1,972 PBT & EO Items 6,6 7,378 9,468 10,656 Profit Before Tax 6,6 7,378 9,468 10,656 Tax 2,235 2,411 3,219 3,623 Net Profit 4,454 4,966 6,249 7,033 Balance Sheet (` mn) Sources of Funds Equity Capital 5,633 5,636 5,639 5,643 Other Reserves 30,980 35,218 40,147 45,860 Net Worth 40,692 44,960 49,929 55,681 Secured Loans 9,243 6,305 6,205 6,105 Unsecured Loans 1, Loan Funds 10,670 6,305 6,205 6,105 Deferred Tax Liability 4,723 4,719 4,860 4,860 Total Capital Employed 56,085 55,984 60,995 66,647 Applications of Funds Gross Block 33,060 35,277 37,051 38,825 Less: Accumulated Dep. 1,829 3,620 5,502 7,473 Net Block 31,231 31,657 31,549 31,352 Capital Work in Progress 7,679 6,864 5,928 6,212 Investments 7,311 7,655 8,420 9,262 Current Assets, Loans & Advances Inventories 1,177 1,123 1,228 1,331 Sundry Debtors 1,518 1,216 2,046 2,218 Cash and Bank Balance 5,529 8,026 12,355 16,775 Loans and Advances Other Current Assets 3,875 1,656 1,739 1,826 sub total 12,242 12,158 17,517 22,314 Less: Current Liabilities & Provisions Current Liabilities 2,238 2,226 2,293 2,361 Provisions sub total 2,378 2,350 2,420 2,493 Net Current Assets 9,865 9,808 15,097 19,821 Total Assets 56,085 55,984 60,995 66,647 E Estimates Cash Flow (` mn) Profit before tax 6,679 7,378 9,468 10,656 Depreciation & w.o. 1,843 1,791 1,1 1,972 Net Interest Exp Direct taxes paid (2,062) (2,228) (3,219) (3,623) Chg. in Working Capital (630) 2,534 (960) (304) Other (190) (90) (A) CF from Opt. Activities 6,030 9,436 7,933 9,311 Capex (1,770) (1,052) (838) (2,058) Free Cash Flow 4,259 8,384 7,095 7,253 Inc./ (Dec.) in Investments (824) (346) (765) (842) Other (616) (2,278) 0 0 (B) CF from Inv. Activities (3,210) (3,676) (1,604) (2,900) Inc./(Dec.) in Debt (978) (4,329) (100) (100) Interest exp net (1,208) (1,039) (621) (611) Dividend Paid (Incl. Tax) (813) (1,017) (1,320) (1,320) (C) CF from Financing (2,972) (6,366) (2,000) (1,991) Net Change in Cash (152) (606) 4,329 4,420 Opening Cash & Cash Equ ,026 12,355 Closing Cash & Cash Equi ,355 16,775 Important Ratios (A) Measures of Performance (%) EBIDTA Margin (excl. O.I.) Interest / Sales Tax/PBT Net Profit Margin (B) As Percentage of Net Sales Employee Expenses Other Expenses (C) Measures of Financial Status Debt/Equity (x) Interest Coverage (x) Average Cost of Debt (%) Debtors Period (days) Closing stock (days) Inventory Turnover Ratio (x) Fixed Assets Turnover (x) WCTurnover (x) Non-Cash WC (` Mn) 4,335 1,782 2,742 3,046 (D) Measures of Investment EPS (`) CEPS (`) DPS (`) Dividend Payout (%) Profit Ploughback (%) Book Value (`) RoANW (%) RoACE (%) (E) Valuation Ratios CMP (`) P/E (x) Market Cap. (` Mn.) 1,19,428 1,19,481 1,19,557 1,19,633 MCap/ Sales (x) EV (` Mn.) 1,24,569 1,17,760 1,13,407 1,08,963 EV/Sales (x) EV/EBDITA (x) P/BV (x) FCF Yiels (%) Dividend Yield (%) E Estimates November 14,

5 DART RATING MATRIX Total Return Expectation (12 Months) Buy > 20% Accumulate 10 to 20% Reduce 0 to 10% Sell < 0% DART Team Purvag Shah Managing Director purvag@dolatcapital.com Amit Khurana, CFA Head of Equities amit@dolatcapital.com CONTACT DETAILS Equity Sales Designation Direct Lines Kishor Bagri, CFA VP - Equity Sales kishorb@dolatcapital.com Kartik Sadagopan VP - Equity Sales kartiks@dolatcapital.com Kapil Yadav VP - Equity Sales kapil@dolatcapital.com Yomika Agarwal VP - FII Sales yomika@dolatcapital.com Derivatives Strategist Designation Bhavin Mehta VP - Derivatives Strategist bhavinm@dolatcapital.com Equity Trading Designation P. Sridhar VP and Head of Sales Trading sridhar@dolatcapital.com Chandrakant Ware AVP - Equity Sales Trading chandrakant@dolatcapital.com Derivatives Trading Designation Shirish Thakkar AVP - Derivatives shirisht@dolatcapital.com Hardik Mehta Sales Trader hardikm@dolatcapital.com Dolat Capital Market Private Limited. 20, Rajabahadur Mansion, 1st Floor, Ambalal Doshi Marg, Fort, Mumbai

6 Analyst(s) Certification The research analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report. I. Analyst(s) and Associate (S) holding in the Stock(s): (Nil) II. Disclaimer: This research report has been prepared by Dolat Capital Market Private Limited. to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies) solely for the purpose of information of the select recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written consent of Dolat Capital Market Private Limited. This report has been prepared independent of the companies covered herein. Dolat Capital Market Private Limited. and its affiliated companies are part of a multi-service, integrated investment banking, brokerage and financing group. Dolat Capital Market Private Limited. and/or its affiliated company(ies) might have provided or may provide services in respect of managing offerings of securities, corporate finance, investment banking, mergers & acquisitions, financing or any other advisory services to the company(ies) covered herein. Dolat Capital Market Private Limited. and/or its affiliated company(ies) might have received or may receive compensation from the company(ies) mentioned in this report for rendering any of the above services. Research analysts and sales persons of Dolat Capital Market Private Limited. may provide important inputs to its affiliated company(ies) associated with it. While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or developments referred to herein, and Dolat Capital Market Private Limited. does not warrant its accuracy or completeness. Dolat Capital Market Private Limited. may not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision. The investment discussed or views expressed herein may not be suitable for all investo` The user assumes the entire risk of any use made of this information. The information contained herein may be changed without notice and Dolat Capital Market Private Limited. reserves the right to make modifications and alterations to this statement as they may deem fit from time to time. Dolat Capital Market Private Limited. and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction. This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Dolat Capital Market Private Limited. and/or its affiliated company(ies) to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investo` Persons in whose possession this report may come, are required to inform themselves of and to observe such restrictions. For U.S. Entity/ persons only: This research report is a product of Dolat Capital Market Private Limited., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by Dolat Capital Market Private Limited. only to "Major Institutional Investors" as defined by Rule 15a- 6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person or entity. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Dolat Capital Market Private Limited. has entered into an agreement with a U.S. registered broker-dealer Ltd Marco Polo Securities Inc. ("Marco Polo"). Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer/entity as informed by Dolat Capital Market Private Limited. from time to time. Dolat Capital Market Private Limited. Corporate Identity Number: U65990MH1993PTC Member: BSE Limited and National Stock Exchange of India Limited. SEBI Registration No: BSE - INB & INF , NSE - INB & INF , Research: INH Registered office: Office No. 141, Centre Point, Somnath, Daman , Daman & Diu Board: Fax: research@dolatcapital.com Our Research reports are also available on Reuters, Thomson Publishers, DowJones and Bloomberg (DCML <GO>)