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Gujarat Gas: Falling short of gas

May 4, 2009

Performance summary
  • Topline declines by 10% YoY during 1QCY09.
  • EBITDA margins decline to 18.3% during the quarter as compared to 21.4% in 1QCY08.
  • Other income increases by 54% during 1QCY09 over the corresponding quarter last year.
  • Bottomline registers a decline of 20% YoY.

Consolidated financial snapshot
(Rs m) 1QCY08 1QCY09 Change
Net sales 3,283 2,968 -9.6%
Other operating income 65 96 47.8%
Total operating income 3,347 3,064 -8.5%
Expenditure 2,630 2,504 -4.8%
Operating profit (EBDITA) 718 560 -22.0%
EBDITA margin (%) 21.4% 18.3%
Other income 49 76 54.2%
Interest 0 0 -0.3%
Depreciation 103 110 5.9%
Profit before tax 663 526 -20.7%
Tax 209 160 -23.3%
Profit after tax/(loss) 454 366 -19.5%
Net profit margin (%) 13.6% 11.9%
No. of shares (m) 64.1
Diluted earnings per share (Rs)* 23.8
Price to earnings ratio (x)* 11.0
*On trailing twelve months earnings

What has driven performance in 1QCY09?
  • Gujarat gas registered a 10% decline in topline during 1QCY09 due to the lower availability of Panna Mukta Tapti (PMT) gas, which the company now receives from GAIL. The company was receiving 2.78 standard cubic meters (mmscm) of gas per day from the PMT fields in 1QCY08, which has come down to 1.96 mmscm per day.

  • Gujarat Gas sold 232 mmscm of gas during 1QCY09, 26% lower than the 313 mmscm in 1QCY08. While the company was able to maintain its PNG supply to the household and CNG segments, supply to industrial units could not be fully met. During 1QCY09, more than 4,000 households were connected. The CNG segment grew by 18% YoY during the quarter and the company now caters to more than 90,000 vehicles.

  • EBITDA margins during 1QCY09 reduced by 3.1% on the back of a more expensive supply mix. While volumes declined by 26%, raw material cost declined by only 8%. Other expenditure also increased by 2.3% (as a % of sales) during the quarter on a YoY basis.

    Cost break-up
    (Rs m) 1QCY08 1QCY09 Change
    Raw materials 2,383 2,193 -7.9%
    % sales 71.2% 71.6%
    Staff cost 93 99 6.5%
    % sales 2.8% 3.2%
    Other expenditure 154 211 37.1%
    % sales 4.6% 6.9%
    Total cost 2,630 2,504 35.7%
    % sales 78.6% 81.7%

  • The company continues to explore new sources of gas including that from the Indian east coast.

What to expect?
The decline in gas availability from the PMT fields and the new city gas regulations are a cause for concern. However, 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.

Gujarat Gas is currently trading at Rs 262 at a price to earnings multiple of 11 times its trailing 12 months earnings. Given the supply side tail winds the company is likely to face in the immediate future, the stock is fairly valued at current levels.

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May 26, 2015 (Close)


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