G
GSPL
201234567898012345678930123456789.5012345678900123456789
+0.50 (+0.18%)
NSE Volume
3.5L+
Broker Reports
BUY
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ADD
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HOLD
In Q1FY21E, GSPL’s transmission volumes are expected to decline as the extended lockdown led to lower CNG & industrial PNG demand from Gujarat. However, in the long run, the transmission business is expected to report stable volumes, adjusting for lower refinery volumes, in the backdrop of growth in CGD & PNG sectors and increased LNG capacity in Gujarat. The management indicated at capacity expansion due to new LNG terminals and to support pipelines of its subsidiaries for expansion outside Gujarat. However, an expected downward revision of transmission tariffs will have an impact on the profitability of the company from H2FY21E. Also, nearly 50% of GSPL value is derived from its listed CGD entity Gujarat Gas (54.1% stake) and unlisted Sabarmati Gas, which commands holding company discount. Hence, investors should prefer directly investing in Gujarat Gas instead of GSPL. We value GSPL on a SOTP basis with investments at ~Rs127/share and standalone business at ~Rs 123/share to arrive at a target price of | 250. We downgrade the stock from BUY to HOLD recommendation.
BUY
We maintain Buy on GSPL with a reduced target price (TP) of Rs273 (+65.7% from CMP) as one of our top mid-cap Oil & Gas picks as we believe its gas transportation business is relatively more resilient and is likely to bounce back once the current nationwide lockdown in the fight against COVID 19 is behind us. We have cut our FY20-22E estimates by 3.8%/12.8%/1% and our SOTP-based TP by 12.7% based on volume assumptions tempered for the twin impact of COVID19 and the economic slowdown. Key risks: Disruption to supplies of LNG cargo arrivals and domestic gas- Pl see extract of news from S&PGlobal.com at the end of the report; curtailment of gas purchases by customers, especially in small industrial segments and city gas volume by subsidiary Gujarat Gas ( normal run-rate of about 9.5 mmscmd) and delay in ongoing projects on network upgradation and new projects.
BUY
GSPL’s 3QFY20 standalone results look good with 7.2%/28% growth YoY in volume/PAT despite the marginal miss vs our and street estimates. Revenue beat NBIE est. and consensus estimate by 11.8%/18.9%, respectively at Rs6.3bn. But EBITDA was a miss vs. NBIE est. and consensus estimate by 5%/5.8% at Rs3.8bn. PAT was also a miss vs. NBIE est. and consensus estimate by 6.5%/10.8% at Rs2.2bn. Overall the results still show good traction on volume and earnings. In our post-result call we gathered from the management that incremental supplies of 5-8mmscmd from the recently started Mundra LNG terminal and low gas prices are positive for GSPL’s growth prospects in the next year. We have marginally raised our FY20-22E estimates and our SOTP based TP by 3% to Rs313 (+31.4% from CMP). Reiterate Buy.
BUY
The National Green Tribunal (NGT) in Jul’19 has directed the Central Pollution Control Board (and respective State PCBs) to fix the cost of damage done to the environment by critically and severely polluted industrial clusters within three months. As India flexes its muscle against industrial pollution, adoption of natural gas by industries bodes well for gas transporters like GUJS (report). Transmission volume growth in 1HFY20 was aided by higher off-take at Morbi industrial cluster (GUJGA volumes averaging ~5.2mmscmd) as well as higher volume for the power sector. We keep our transmission tariff unchanged at INR1,477/mscm for FY20/FY21 with transmission volume estimate at 37mmscmd/38.5mmscmd. However, since the company has adopted lower tax rate, its transmission tariffs are under consideration for reduction by PNGRB.
BUY
The stock trades at 10.4x PE on FY21 Sept. EPS, 8.2x EV/E on FY21 Sept. EBITDA and FCF yield of 6% on Sept FY21E, which looks reasonable, given that the stock is up 15.5% in the last one year. We see company’s net debt declining from Rs24bn to Rs167mn by FY22E after aggregate capex and investments of Rs6bn. We estimate FCF to increase from Rs10.8bn on average in FY19/FY20E to Rs9.3/13.2bn over FY21E-22E and should sustain over the longer term as well. Our Buy call is based on (i) sustained long term growth outlook in transmission volume, supported by India’s booming natural gas market (ii) huge leverage to a step surge in future volume and (iii) compelling valuation that offset concerns over tepid growth over FY21-22E as well as regulatory/policy issues and execution risk.
HOLD
GSPL’s transmission business is expected to report stable volumes, adjusting for lower Reliance volumes, in the backdrop of growth in CGD & PNG sectors and increased LNG capacity in Gujarat. The upward revision of transmission tariffs by PNGRB is a positive for the stock and will lead to decent profitability, going forward. However, nearly 50% of GSPL value is derived from its listed CGD entity Gujarat Gas (54.1% stake) and unlisted Sabarmati Gas, which commands holding company discount. Hence, investors can directly invest in Gujarat Gas instead of GSPL. We value GSPL on an SOTP basis with investments at ~| 91 per share and standalone business at ~| 89 per share to arrive at a target price of | 180 with HOLD recommendation.
BUY
We value GSPL’s transmission business using Discounted Cash Flow (DCF) at Rs 120/sh. To this, we add Rs 87/sh as value of its investments in GGL, Sabarmati Gas (30% discount to EV/EBTDA valuation) and other investments (at book value) to arrive at the target price of Rs 207/sh. We initiate with BUY.
HOLD
GSPL’s transmission business is expected to report stable volumes in the backdrop of growth in CGD & PNG sectors and increased LNG capacity in Gujarat. The expected upward revision of transmission tariffs by PNGRB is a key positive for the stock and will led to increased profitability, going forward. However, a reduction in value of its listed CGD entity Gujarat Gas (54.1% stake) has negated the positive impact of tariff hikes. We value GSPL on an SOTP basis with investments at ~| 67.2 per share (| 79.6 earlier) and standalone business at ~Rs 112.4 per share to arrive at a target price of Rs 180 with HOLD recommendation.
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