Sharekhan's research report on Gujarat State Petronet
Q3FY23 PAT of Rs. 171 crore (down 46% q-o-q) was 15% below our estimates due to lower-than-expected gas transmission volume of 22 mmscmd (down 9% q-o-q) and higher operating costs. Net transmission tariffs remained resilient at Rs. 1.7/scm (up 1.3% q-o-q) but EBITDA margins fell by 11% q-o-q to Rs. 1.3/scm given lower volume/high costs. Volume from CGD/refinery & petchem declined by 3%/24% q-o-q while that from fertilizer/power sector increased by 4%/88% q-o-q. Recent PNGRB amendments to the natural gas pipeline tariff allays concern over steep tariff cuts of 15-20% to a large extent and bodes well for revival in gas pipeline capex cycle. Moreover, a recent steep fall in spot LNG price to $17-18/mmBtu would help in volume recovery.
Outlook
We maintain a Buy on GSPL with an unchanged PT of Rs. 342 as core pipeline business is available at only 1x FY24E EPS and we expect subsidiary Gujarat Gas’ volumes to also recover given narrowing down of pricing gap between propane and I-PNG.
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