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Gujarat Gas: Higher spreads boost profits
Feb 12, 2014

Gujarat Gas Company Ltd has announced its results for the fourth quarter of financial year 2013 (4QCY13). During the quarter, the company has reported a 2.4% year on year (YoY) growth in the net sales while net profits for the quarter were up 29.3% YoY. For full year, the topline and bottomline registered a growth of 1.5% YoY and 28.9% YoY respectively.

Performance summary
  • ? Net sales for the quarter grew by 2.4% on a year on year basis (YoY). For full year (CY13), the net sales grew by 1.5 %.
  • Operating profit for the quarter was up 21.5% YoY with margins at 17.2%, as compared to 14.5% in 4QCY12 on account of higher gross spreads. For CY13, the operating profits grew by 34.4% YoY with margins at 17.5%, as compared to 13.2% in CY12.
  • Net profits for the group were up by 29.3 % YoY during the quarter, with margins at 11.6% as compared to 9.2% in 4QCY12. For CY13, the net profits were up by 28.9% YoY with margins at 11.8%, as compared to 9.3% in CY12.

(Rs m) 4QCY12 4QCY13 Change CY12 CY13 Change
Net Sales 7,565 7,749 2.4% 30,669 31,129 1.5%
Other operating income 58 53 -8.5% 291 184 -36.8%
Total operating income 7,623 7,802 2.3% 30,960 31,313 1.1%
Expenditure 6,521 6,463 -0.9% 26,878 25,825 -3.9%
Operating profit (EBDITA) 1,102 1,339 21.5% 4,082 5,488 34.4%
EBDITA margin (%) 14.5% 17.2%   13.2% 17.5%  
Other income 102 171 67.2% 672 664 -1.1%
Interest 0 1 39.5% 2 2 27.2%
Depreciation 183 197 7.7% 658 765 16.2%
Profit before tax 1,022 1,313 28.6% 4,094 5,385 31.5%
Profit before tax margins (%) 13.4% 16.8%   13.2% 17.2%  
Tax 316 403 27.4% 1209 1680 39.0%
Profit after tax/(loss) 706 911 29.1% 2,885 3,705 28.4%
Net profit margin (%) 9.3% 11.7%   9.3% 11.8%  
Minority share 4 4 -4.1% 19.27 11.54 -40.1%
Profit after tax for the Group 701 906 29.3% 2,866 3,694 28.9%
Group PAT margins (%) 9.2% 11.6%   9.3% 11.8%  
No. of shares (m)         128  
Diluted earnings per share (Rs)*         28.8  
Price to earnings ratio (x)*         8.1  
*based on trailing 12 months earnings

What has driven performance in 4QCY13?
  • The net sales during the quarter grew 2.4% YoY mainly on account of higher realizations, offset by decline in volumes. The volumes were down mainly because of the slowdown in the economy adversely impacting the gas demand.

  • The operating profits and margins improved during the quarter mainly on account of higher realisations. Hence, despite an increase in the cost of gas, the operating margins during the quarter increased to 17.2% from 14.5% in the corresponding quarter last year.

  • The net profits for the quarter grew by 29% YoY on account of higher realisations and 67% YoY increase in the other income.
What to expect?
The stock is currently trading at a trailing twelve months price to earnings ratio of 8.1 times

While the Government has recently given directive to diverge cheap domestic gas to CGD companies, Gujarat Gas does not stand to gain much since it mainly caters to the industrial customers. Weak demand for gaseous from the industrial sector, high cost of imported gas, shortage in the domestic gas supplies and volatile currency remain major concerns for the company. We maintain a 'Sell' view on the company.

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