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Gujarat Gas: Business as usual

Oct 23, 2003

Gujarat Gas, the gas transmission major, has declared its 3QFY03 results. A near 38% growth in topline was matched by a similar 39% YoY growth in the bottomline. On a nine-month basis, while the topline grew by 30%, net profits have gone up by 17%. Let us take a detailed look at the performance of the company.

(Rs m) 3QFY03 3QFY04 Change 9mFY03 9mFY04 Change
Net Sales 978 1,346 37.7% 2,858 3,724 30.3%
Other Income 24 17 -31.5% 148 125 -15.3%
Expenditure 760 1,095 44.0% 2,141 2,950 37.8%
Operating Profit (EBDIT) 218 251 15.5% 717 774 8.0%
Operating Profit Margin (%) 22.3% 18.7%   25.1% 20.8%  
Interest 25 0 -99.4% 76 19 -74.5%
Depreciation 30 41 37.2% 84 120 42.0%
Profit before Tax 187 227 21.5% 705 761 7.9%
Tax 71 72 1.4% 279 262 -6.1%
Profit after Tax/(Loss) 116 155 33.8% 427 499 17.1%
Net profit margin (%) 11.8% 11.5%   14.9% 13.4%  
No. of Shares 12.8 12.8   12.8 12.8  
Earnings per share* 36.1 48.3   44.3 51.9  
P/E Ratio   9.8     9.1  

On a quarter on quarter basis, the company has witnessed a 70% growth (85% previous quarter) in the volume of gas sold. As a result, the topline continues to grow at a robust speed. On a year on year basis, the nine-month period growth has been quite significant to say the least (up 212%). Apart from this, new gas transmission tie-ups have also helped the company in posting the healthy result. During the quarter, the company tied up with Garden Silk Mills and Gujarat State Fertilizer Limited for the sale of gas. The company’s gas consuming customer base stands at around 140,000.

Cost breakup
% of net sales 3QFY03 3QFY04 9mFY03 9mFY04
Raw materials 69.8% 73.1% 67.0% 71.3%
Staff Costs 3.9% 3.3% 3.7% 3.3%
Other Expenditure 4.1% 4.9% 4.2% 4.5%

Operationally, the company continues to face pressure. This is mainly due to the increase in raw material (gas) price. As a result of this, operating profit margin has gone down by 360 basis points. Raw materials constitute a substantial 44% of total expenditure and as a percentage of net sales it has gone up by 5% to 73% over the previous year. Although at pre-tax levels, interest expense continues to go down, depreciation expenses have gone up by 37% probably due to the two gas tie-ups during the quarter.

At the current price of Rs 475, the stock trades at a P/E multiple of 9.1x 9mFY04 annualised earnings. Even though new client acquisitions will help the company in growing its customer base but the increase in gas prices are likely to affect the operating margins. The company is dependent on other gas suppliers like Gas Authority for its supply. Even though the supply may increase going forward, Gujarat Gas is unlikely to be able to control the pricing of it.

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