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GSPL : Higher realizations offset volume pressure
Sep 17, 2013

Gujarat State Petronet Ltd (GSPL) has announced its results for first quarter of the fiscal year 2013-2014 (1QFY14)

The company has reported a 9.9% year on year (YoY) increase in the topline while net profits for the quarter grew by 1.1% YoY.

Performance summary
  • Revenues for the quarter registered a growth of 9.9% on a year on year (YoY) basis.
  • Operating profits grew by 8.4% YoY during the quarter with margins at 90.9% as compared to 92.2% in 1QFY13.
  • Net profits for the quarter were up 1.1% YoY with net profit margins at 42.5%, as compared to a net profit margin of 46.2% in 1QFY13.

Standalone financial summary
( Rs m) 1QFY13 1QFY14 Change
Sales 2,700 2,968 9.9%
Expenditure 211 270 28.0%
Operating profit (EBDITA) 2,490 2,698 8.4%
EBDITA margin (%) 92.2% 90.9%  
Other income 151 132 -13.0%
Interest (net) 317 380 19.7%
Depreciation 439 458 4.2%
Profit before tax 1,884 1,992 5.7%
Pretax margin (%) 69.8% 67.1%  
Tax 636 729 14.7%
Profit after tax/(loss) 1,248 1,263 1.1%
Net profit margin 46.2% 42.5%  
No. of shares (m)   563  
Diluted earnings per share (Rs)*                9.6  
Price to earnings ratio (x)**   5.4  
**On trailing 12 months basis

What has driven performance in 1QFY14?
  • The net sales for the quarter were up by 9.9% YoY. The gas volumes transported for the quarter stood at 2,015.27 million standard cubic metres (mscm), down 28.8% YoY. However, the overall revenues were higher due to increase in average tariff realizations (up around 54% YoY).

  • The operating profits for the quarter grew by 8.4% YoY on the back of higher realizations. However, the growth was limited by increase in the staff costs and higher operation and maintenance costs.

    Cost breakup
    (Rs m) 1QFY13 1QFY14 Change
    Staff costs 44 67 53.8%
    as a % of sales 1.6% 2.3%  
    Operation and maintenance costs 118 154 30.8%
    as a % of sales 4.4% 5.2%  
    Other costs 49 48 -1.8%
    as a % of sales 1.8% 1.6%  
    Total expenditure 211 270 28.0%
    as a % of sales 7.8% 9.1%  

  • The net profit for the quarter grew by a modest 1.1% YoY. The other income for the quarter declined by 13% YoY while interest expenses and depreciation charges were up by 19.7% YoY and 4.2% YoY respectively.
What to expect?
Being in the gas sector, GSPL is subject to regulatory risks. Also, with declining domestic gas volumes, the company suffers from capacity underutilization risks and perils of ship or pay contracts. That said, it has a strong moat in Gujarat since it operates the largest transmission network in the state on an open access basis.

At the current stock price of Rs 52, the stock is trading at a 12 months trailing price to earnings ratio of 5.4. We maintain a 'Hold' view on the stock. We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

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