X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Gujarat Gas: Lower gas cost boosts margins - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

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

Gujarat Gas: Lower gas cost boosts margins
Nov 18, 2013

Gujarat Gas Company Ltd has announced its results for the third quarter of financial year 2013 (3QCY13). During the quarter, the company has reported a 0.2% year on year (YoY) decline in the net sales. In contrast, the net profits for the quarter were up by 19.7 % YoY. Here is our analysis of the results.

Performance summary
  • Net sales for the quarter declined marginally by 0.2% on a year on year basis (YoY). For nine months ending September 2013 (9mCY13), the net sales grew by 1.2 % .
  • Operating profit for the quarter was however up by 35.6% YoY with margins at 22.5% as compared to 16.5% in 3QCY12. For the nine months, the operating profits grew by 39.2% YoY with margins at 17.6%, as compared to 12.8% in 9mCY12.
  • Net profits for the group were up by 19.2% YoY during the quarter, with margins at 14.3% as compared to 11.9% in 3QCY12. For the nine months, the net profits were up by 28.7% YoY with margins at 11.9%, as compared to 9.3% in 9mCY12.
  • The Board of Directors has declared an interim dividend of Rs 9 per equity share.

Consolidated financial performance snapshot
Rs m 3QCY12 3QCY13 Change 9mCY12 9mCY13 Change
Net Sales 8,302 8,283 -0.2% 23,104 23,379 1.2%
Other operating income 70 36 -48.7% 234 131 -43.8%
Total operating income 8,372 8,319 -0.6% 23,338 23,511 0.7%
Expenditure 6,993 6,449 -7.8% 20,357 19,362 -4.9%
Operating profit (EBDITA) 1,379 1,870 35.6% 2,980 4,149 39.2%
EBDITA margin (%) 16.5% 22.5%   12.8% 17.6%  
Other income 193 105 -45.4% 569 493 -13.4%
Interest 0 1 53.8% 1 1 23.3%
Depreciation 161.3 192.1 19.1% 475.76 568.23 19.4%
Profit before tax 1,411 1,783 26.4% 3,073 4,072 32.5%
Profit before tax margins (%) 16.8% 21%   13.2% 17%  
Tax 410 590 43.8% 893 1277 43.0%
Profit after tax/(loss) 1,001 1,193 19.2% 2,180 2,795 28.2%
Net profit margin (%) 12.0% 14.3%   9.3% 11.9%  
Minority share 5.8 2.25 -61.2% 14.88 7.33 -50.7%
Profit after tax for the Group 995 1,191 19.7% 2,165 2,787 28.7%
Group PAT margins (%) 11.9% 14.3%     11.9%  
No. of shares (m)         128  
Diluted earnings per share (Rs)*         27.2  
Price to earnings ratio (x)*         10.8  
*based on trailing 12 months earnings

What has driven performance in 3QCY13?
  • The net sales declined marginally by 0.2% YoY during the quarter. The gas sales volumes during the quarter stood at 247 million standard cubic metres (mscm), up 3.3% QoQ. However, on an annual basis, the gas sales volumes declined by 16.3% YoY during the quarter. The realizations during the quarter were up by around 19% YoY and by 8% QoQ. During the nine months, the gas sales volumes stood at 750 mscm, down 15.4% YoY while average realizations were up by 19.1% YoY.

  • The operating profit margins stood at 22.5% during the quarter, up from 16.5% in 3QCY12. This was mainly on account of higher realizations and lesser growth in the cost of gas. As such, EBIDTA per scm stood at Rs 7.6 during the quarter, up from Rs 4.68 per scm in 3QCY12. The overall cost of materials (as a % of sales) declined to 72.6% from 82.8% in 3QCY12. For the nine months, the operating profit margin stood at 17.6%, up from 12.8% in the corresponding period last year. The EBITDA per scm during the 9 months stood at Rs 5.53 per scm, up from Rs 3.36 per scm in corresponding period last year.

  • The net profit margins for the quarter improved to 14.3% from 11.9% in 3QCY12.This was mainly on account of higher realizations and modest growth in gas cost. However, the growth in the net profits was partially offset by increase in the depreciation and increase in the effective tax rate.

    Cost break-up...
    Rs m 3QCY12 3QCY13 Change 9mCY12 9mCY13 Change
    Raw material 6,504 5,956 -8.4% 18,800 17,816 -5.2%
    as a % of Sales 77.7% 71.6%   80.6% 75.8%  
    Employee expenses 156 144 -7.5% 482 488 1.2%
    as a % of Sales 1.9% 1.7%   2.1% 2.1%  
    Other expenses 333 349 4.7% 1,075 1,059 -1.5%
    as a % of Sales 4.0% 4.2%   4.6% 4.5%  
    Total expenses 6,993 6,449 -7.8% 20,357 19,362 -4.9%
    as a % of Sales 83.5% 77.5%   87.2% 82.4%  
What to expect?
The shortage of domestic gas, rising share of imported gas, volatility in gas price and rupee depreciation remain a key concern for the company. While the company has reported growth in profits as a result of higher realizations, the margins may come under pressure because of the above mentioned reasons. Also, further price hikes can dampen the gas demand. At current prices, the stock is trading at around 11 times its trailing twelve earnings. We maintain 'Sell' recommendation on the stock on account of the concerns mentioned above.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

GUJARAT GAS SHARE PRICE


May 26, 2015 (Close)

TRACK GUJARAT GAS

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

MARKET STATS