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Gujarat Gas: Driven by LNG volumes - Views on News from Equitymaster
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Gujarat Gas: Driven by LNG volumes
Mar 12, 2010

Performance summary
  • Topline increases by 9%YoY during CY09 on account of higher LNG volumes.
  • EBITDA margins expand to 19.6% during the year.
  • Other income decreases by 36% during CY09 over the last year.
  • Bottomline registers a growth of 10% YoY during the period.
  • Declares a dividend of Rs 3 per share and a special one-time dividend of Rs 5 per share.


Consolidated financial snapshot
(Rs m) 4QCY08 4QCY09 Change CY08 CY09 Change
Net sales 3,293 3,859 17.2% 12,965 14,176 9.3%
Expenditure 2,834 3,091 9.1% 10,646 11,394 7.0%
Operating profit (EBDITA) 459 768 67.4% 2,319 2,782 20.0%
EBDITA margin (%) 13.9% 19.9%   17.9% 19.6%  
Other income 93 58 -37.7% 393 253 -35.6%
Interest (net) 0 0 51.4% 1 1 22.7%
Depreciation 103 124 20.4% 404 461 13.9%
Profit before tax 449 702 56.3% 2,307 2,574 11.6%
Tax 133 239 79.5% 718 822 14.5%
Profit after tax/(loss) 316 463 46.6% 1,588 1,751 10.3%
Net profit margin (%) 9.6% 12.0%   12.2% 12.4%  
No. of shares (m)         128.2  
Diluted earnings per share (Rs)         13.7  
Price to earnings ratio (x)         19.8  

What has driven performance in 4QCY09?
  • Gujarat gas achieved a topline growth of 17.2% during 4QCY09 on the back of volumes growth driven by LNG supplies. However, the supply of Panna Mutka Tapti gas was below the contracted levels. During 4QCY09, about 55 m standard cubic meters of LNG was procured by the company. It contributed to about 20% of the companys supply portfolio.

  • During CY09, the overall volume growth was 10% YoY driven mainly by a 20% growth in the retail segment comprising of industrial and CNG sales.

  • EBIDTA margins improved during CY09 as raw material cost declined by 1.3% (as a percentage of sales) on a YoY basis, while other expenditure declined by 0.5% (as a percentage of sales).

    Cost break-up
    (Rs m) 4QCY08 4QCY09 Change CY08 CY09 Change
    Raw materials 2,424 2,676 10.4% 9,338 10,032 7.4%
    % sales 73.6% 69.4%   72.0% 70.8%  
    Staff cost 121 121 0.0% 414 452 9.0%
    % sales 3.7% 3.1%   3.2% 3.2%  
    Other expenditure 290 294 1.4% 893 910 1.9%
    % sales 8.8% 7.6%   6.9% 6.4%  
    Total cost 2,834 3,091 9.1% 10,646 11,394 7.0%
    % sales 86.1% 80.1%   82.1% 80.4%  

  • Gujarat Gas has declared a dividend of Rs 3 per share for CY09 and a special one-time dividend of Rs 5 per share.

What to expect?
The company is performing well in industrial retail, where the margins are better than the bulk industrial sales. Also, the CNG business, another high margin segment, is expected to have a larger share in the revenue mix of the company going forward.

However, the decline in gas availability from the PMT fields and the new city gas regulations are a cause for concern. The company sees LNG and KG basin D6 gas as the two main sources of gas for the company going forward. Gujarat Gas is currently trading at Rs 270 at a price to earnings multiple of 13 times its estimated CY11 earnings. We would advise against taking fresh positions in the stock at the current juncture.

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May 26, 2015 (Close)

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