Gujarat Gas: Gets in the numbers - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Gujarat Gas: Gets in the numbers

Apr 26, 2002

The regional gas transmission & distribution (T&D) company, Gujarat Gas Company Ltd. (GGCL) declared results yesterday. The turnover of the company has been consistently growing by double digits and has met market expectations. Having said that, compared to the last four quarters, the growth has declined. This could be due to a higher base and the company ramping up operations.

(Rs m) 1QFY02 1QFY03 Change
Net Sales 826 941 13.9%
Other Income 30 36 20.9%
Expenditure 592 665 12.3%
Operating Profit (EBDIT) 234 276 17.9%
Operating Profit Margin (%) 28.4% 29.4%  
Interest 26 25 -5.1%
Depreciation 28 27 -5.8%
Profit before Tax 209 261 24.4%
Extraordinary items (16) 45  
Tax 58 94 64.1%
Profit after Tax/(Loss) 136 212 55.9%
Net profit margin (%) 16.4% 22.5%  
No. of Shares 12.8 12.8  
Earnings per share* 42.3 66.0  
P/E Ratio   9.0  

Turnover growth has been driven by both better volumes and higher realisations. For 1QFY03, T&D volumes increased by 7.3% YoY and realisations have improved by an estimated 6.2%. The agreement with Gujarat State Petronet Ltd. (GSPL) to transport 0.5 mmscm per day (mmscmd) of gas, along the HAPi pipeline, in the second half of FY02 has contributed to volumes. In fact, gas transportation revenues amounted to Rs 31.2 m for the quarter. The company has augmented its customer base by an estimated 16,000 in the past twelve months. Majority of the new customers are likely to be retail customers for piped gas.

As has been mentioned earlier in our reports, gas transportation companies are likely to enjoy higher operating leverage, as compared to other industries. This suggests that a higher proportion of sales is likely to be reflected in the bottomline on augmenting operating rates. Consequently, the company has been able to hike OPM by 100 basis points. The increas in raw material costs has largely been driven by higher gas volumes. This indicates that estimated improved realisations are reflected in operating profits resulting in better margins.

The higher cash flows in the previous fiscal is likely to have resulted in higher investment income in the quarter ended March '02. The extraordinary item in 1QFY02 & 1QFY03 refer to prior period expense and non-recurring income respectively. Adjusting for the same, profit after tax would have increased by only 9.4%, which indicates that higher tax has eaten into post tax profits. In the concerned quarter GGCL has become a full tax rate paying company.

At Rs 592 the scrip is trading on a multiple of 9x 1QFY03 annualised earnings. On adjustment of extraordinary items, the valuation increases to 11.4x. In the corresponding period of the previous year, the stock was trading on a multiple of 13.6x annualised earnings. Valuations, over the past twelve months, have been sliding as markets factor in the risk of higher gas prices with dismantling of the administered pricing mechanism (APM).

That said, the hike in prices is likely to be graded, as key gas consumers belong to the sensitive power and fertiliser sector. As per reports, the Government, in two phases, could link international and domestic prices by FY04. Another concern dogging the company has been Gujarat Government's appointment of GSPL as the sole agency for establishing a gas grid in the state. Although Gujarat Gas has been offered a stake in GSPL, the company will require a no-objection certificate (NOC) from the sole agency for developing competing pipelines. Further, as per reports, the centre is contemplating a new gas policy, which increases the uncertainty in business.

Equitymaster requests your view! Post a comment on "Gujarat Gas: Gets in the numbers". Click here!


More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


May 26, 2015 (Close)


  • Track your investment in GUJARAT GAS COMPANY with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks