Gujarat State Petronet

19 May 2016
4QFY16 Results Update | Sector: Oil & Gas
Gujarat State Petronet
BSE SENSEX
25,400
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,783
GUJS IN Lower than estimated volumes lead EBITDA miss
563.3  Gujarat State Petronet reported EBITDA at INR2.0b (est INR2.3b; +3% YoY,
76.6 / 1.1
-2% QoQ). Reported PAT was also below estimates at INR1.0b (est INR 1.1b;
154 / 108
+49% YoY, -19% QoQ). EBITDA miss translated to PAT miss as well though PAT
1/8/24
was partly boosted by lower interest expenses at INR168m (est. of INR199m).
79
FY16 EBITDA stood at INR8.6b lower 7% YoY due to lower implied tariffs; PAT
62.3
CMP: INR136
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E
Net Sales
9.9
11.5
12.9
EBITDA
8.6
10.1
11.3
PAT
4.4
5.2
6.1
EPS (INR)
7.9
9.3
10.9
Gr. (%)
23.9
18.0
16.8
BV/Sh (INR)
70.5
77.7
86.1
RoE (%)
11.7
12.6
13.3
RoCE (%)
9.7
10.5
11.1
P/E (x)
17.2
14.6
12.5
P/BV (x)
1.9
1.7
1.6
Estimate change
TP change
Rating change
Quarterly Performance
Y/E March
Net Sales
Change (%)
Employee Costs
Operating expenses
Other Expenditure
EBITDA
% of Net Sales
% Change
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
PAT
Adj. PAT
Change (%)
EPS (INR)
Transmission Vol. (mmscmd)
Implied adj. tariff (INR/mscm)
E: MOSL Estimates
1Q
2,304
-22.2
76
180
49
1,999
86.8
-25.7
469
321
135
1,343
494
36.8
849
850
-33
1.5
22.2
1,077
TP: INR145(+7%)
Neutral
stood at INR4.4b higher YoY due to higher other income and lower tax rate.
Volumes increase below estimates, tariff lower
 4QFY16 transmission volumes stood at 24.4mmscmd (est. 25.6mmscmd; +8%
YoY, -3% QoQ) due to maintenance shutdown at ONGC’s Gujarat field. We
expect subsequent volume recovery to 3QFY16 levels (at ~25mmscmd)
 Implied transmission tariff was below estimate at INR1,028/mscm (est.
INR1,072; -10% YoY and -2% QoQ).
 While lower spot LNG prices have been a positive, competitive liquid fuel prices
have delayed an expected gas consumption uptick. PNGRB’s pending tariff
revision will provide a meaningful upside in our view.
Valuation and view
 We model (a) transmission tariff at INR1,150/mscm in FY17 and 1,180/mscm in
FY18 v/s actual 1,069/mscm in FY16 and (b) volumes at 27.5/30 mmscmd in
FY17/FY18 v/s actual 24.5mmscmd in FY15.
 Medium term risk is some volumes (~5mmscmd) going away with the start of
RIL’s petcoke gasification project. A tariff revision by PNGRB is an upside risk
and a 10% tariff increase could increase our FY18 EPS by 13%. The stock trades
at 12.5x FY18E Adj. EPS of INR10.9 and implies a 14.6x FY17E Adj. EPS of INR9.3.
Our SOTP-based target price stands at INR145. Neutral.
FY15
2Q
3,510
26.7
70
141
68
3,231
92.0
28.8
466
307
152
2,610
915
35.1
1,695
1,110
-3
3.0
24.2
1,099
3Q
2,428
-0.4
139
208
51
2,031
83.6
-1.3
478
288
134
1,397
510
36.5
887
888
2
1.6
22.9
1,136
4Q
2,363
2.5
70
193
126
1,973
83.5
-1.3
480
262
140
1,251
580
46.4
671
741
-19
1.2
22.6
1,143
1Q
2,557
11.0
74
193
53
2,237
87.5
11.9
434
207
143
1,738
610
35.1
1,128
1,128
33
2.0
24.2
1,126
FY16
2Q
2,526
-28.0
113
121
52
2,240
88.7
-30.7
464
213
122
1,685
600
35.6
1,085
1,085
-2
1.9
24.3
1,068
3Q
2,475
1.9
89
243
57
2,086
84.3
2.7
472
184
288
1,718
483
28.1
1,235
1,235
39
2.2
25.1
1,054
4Q
2,313
-2.1
71
130
69
2,042
88.3
3.5
473
168
137
1,538
541
35.2
997
997
35
1.8
24.4
1,028
FY15
FY16
10,606
1.3
356
722
294
9,234
87.1
-0.2
1,892
1,178
560
6,603
2,500
37.9
4,104
3,588
-14
7.3
23.0
1,113
9,870
-6.9
347
687
231
8,605
87.2
-6.8
1,843
773
690
6,679
2,234
33.4
4,445
4,445
24
7.9
24.5
1,069
(INR Milllion)
FY16 Var. vs
4QE
est
2,634 -12.2%
4.3
108 -34.1%
184 -29.4%
55
25.2%
2,286 -10.7%
86.8
2.1
482
-1.8%
199 -15.7%
133
2.9%
1,738 -11.5%
591
-8.5%
34.0
1,147 -13.1%
1,147 -13.1%
6
2.0 -13.1%
25.6
-4.7%
1,072
-4.1%
Harshad Borawake (HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Rajat Agarwal (Rajat.Agarwal@MotilalOswal.com); +91 22 3982 5558
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Gujarat State Petronet
Exhibit 1: Volumes down 3% QoQ to 24.5 mmscmd due to ONGC’s Gujarat field shutdown
Volume (mmscmd)
Tariff (INR/mscm)
1,768
1,365
1,291
1,136
1,411
1,126
1,2101,077
1,143 1,0681,0541,028
1,099
35.5 36.8 35.2 32.8 31.1
9931,043
899 956 903
850
835
790
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
31.1 28.6 27.3 22.2 22.1 21.2 20.2 20.8 22.2 24.2 22.9 22.6 24.2 24.3 25.1 24.4
Source: Company, MOSL
Exhibit 2: Implied tariff largely stable in last few quarters implying negligible impact of take-or pay variations
1,054
1,028
3QFY16
4QFY16
1,126
1QFY16
1,068
1,143
4QFY15
2QFY16
1,136
1,099
2QFY15
3QFY15
1,077
1QFY15
1,210
4QFY14
3QFY14
1,291
1,411
1,365
2QFY14
1QFY14
1,768
1,043
3QFY13
4QFY13
993
903
1QFY13
2QFY13
956
4QFY12
835
2QFY12
899
850
1QFY12
3QFY12
790
4QFY11
Tariff (INR/mscm)
Source: Company, MOSL
Exhibit 3: Planned 3 new pipelines still delayed: GSPL can start GIGL pipeline earlier than GITL
Company
GIGL (GSPL India Gasnet Ltd.)
GITL (GSPL India Transco Ltd.)
Pipeline Project
Mehsana-Bhatinda
Bhatinda-Srinagar
Mallavaram-Bhilwara
Pipeline
1,670
740
1,746
Capacity (mmscmd)
42
31
52
Capex
45
12
65
Source: Company, MOSL
Valuation and view




19 May 2016
Key events to watch: (1) Construction of three new trunk pipelines within set
timelines and (2) Volume ramp-up
We do not assign any value to the three new cross-country pipelines due to lack
of clarity on gas availability.
We model (a) transmission tariff at INR1,150/mscm in FY17 and 1,180/mscm in
FY18 v/s actual 1,069/mscm in FY16 and (b) volumes at 27.5/30 mmscmd in
FY17/FY18 v/s actual 24.5mmscmd in FY15.
Medium term risk is some volumes (~5mmscmd) going away once RIL starts its
petcoke gasification project. A tariff revision by PNGRB will provide upside
beyond our estimates and a 10% tariff increase could increase our FY18 EPS by
13%. The stock trades at 12.5x FY18E Adj. EPS of INR10.9 and implies a 14.6x
FY17E Adj. EPS of INR9.3. Our SOTP-based target price stands at INR145.
Neutral.
2
Gujarat State Petronet
Story in charts
Exhibit 4: GSPL’s volumes growth contingent to gas
production/LNG imports
1,180
Source: Company, MOSL
Exhibit 6: ROE declined from 30% to 12.5% in 4 yrs…
42
Capex (INR b)
65
52
FY18E
FY17E
FY16
FY15
*New pipeline capex not factored
FY15
FY14
0.17
0.10
-0.02
FY18E
0.30 0.29 0.25
FY13
FY12
FY11
FY10
FY09
FY08
FY06
FY18E
FY17E
FY16
Exhibit 8: Total capex of >INR122b for 3 new trunk pipelines
45
0.37
FY17E
0.46
Source: Company, MOSL
Capacity (mmscmd)
0.78 0.75
10.8 10.3 9.7 10.5 11.1
FY15
14.5
0.96
FY16
13.4 12.6 11.7 12.6
FY13
FY12
FY11
0.80 0.71
FY14
17.5 17.0 16.0
FY10
FY09
Net Debt / Equity (x)
19.9
6.8 8.0 7.7
FY08
FY06
5.7
FY07
7.1
9.5 10.1 10.5
87
Exhibit 7: ... Expect D/E ratio to decrease further…
RoCE %
23.3
87
87
Source: Company, MOSL
FY07
RoE %
29.8 28.4
FY14
30.0
FY18E
FY13
27.5
FY17E
FY12
24.8
FY16
FY11
23.0
FY15
FY10
21.1
FY14
FY09
27.3
FY13
FY07
34.0
FY12
EBITDA Margin (%)
93 92 91
88 87
74
FY06
35.7
FY11
87 87
FY08
1,150
1,069
1,113
1,322
1,135
872
32.0
FY10
798
14.9
FY09
850
16.8
FY08
898
14.3
FY07
680
94
84
10.5
607
Tariff (INR/mscm)
FY06
689
Volume (mmscmd)
Exhibit 5: EBITDA Margin to remain strong at 87%...
Source: Company, MOSL
Exhibit 9: GSPL 1 yr forward P/E chart
PE (x)
60
Peak(x)
Avg(x)
Min(x)
46.3
45
30
31
14.2
15
12
14.1
4.6
Source: Company, MOSL
19 May 2016
Apr-16
Jan-15
Oct-13
Jul-12
Apr-11
Jan-10
Mallav-Bhil
Oct-08
Bhat-Sringr
Jul-07
Mehs-Bhat
Apr-06
0
Source: Company, MOSL
3
Gujarat State Petronet
Financials and Valuations

Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
19 May 2016
Medium term risk is some volumes (~5mmscmd) going away once RIL starts its
(INR Million)
petcoke gasification
project.
While,
tariff revision
our
2011
2012
2013
2014 PNGRB2015
2016is an upside
2017E risk to
2018E
estimates
and 10% tariff
could increase
13%.
10,391
11,153
11,603increase
10,473
10,606 our FY18
9,870 EPS by
11,543
12,921
4.8 stock trades
7.3
4.0 FY18E -9.7
-6.9 implies17.0
11.9
 The
at 12.4x
Adj. EPS of1.3
INR10.9 and
a 14.1x FY17E
9,619
10,241
10,591
9,255
9,234
8,605
10,094
11,299
Adj. EPS of INR9.7. Our SOTP-based (DCF value of INR110 and INR35/sh for its
92.6
91.8
87.2
87.4
87.4
stake in CGD
entities)91.3
target price88.4
stands at 87.1
INR145. Neutral.


1,299
8,320
1,819
8,422
1,861
8,730
1,839
7,416
1,892
7,342
1,843
6,761
1,938
8,156
2,042
9,257
961
291
0
7,650
2,586
33.8
0
5,064
5,064
22.4
1,302
593
0
7,714
2,493
32.3
0
5,221
5,221
3.1
1,263
790
0
8,257
2,876
34.8
0
5,381
5,381
3.1
1,418
585
0
6,583
2,391
36.3
0
4,191
4,191
-22.1
1,178
560
121
6,845
2,500
36.5
0
4,346
3,588
-14.4
773
690
0
6,679
2,234
33.4
0
4,445
4,445
23.9
706
533
0
7,983
2,740
34.3
0
5,243
5,243
18.0
706
776
0
9,327
3,201
34.3
0
6,125
6,125
16.8
2011
5,626
14,438
20,063
14,835
2,641
37,539
41,935
10,118
31,817
3,546
766
8,997
623
698
2,390
5,286
7,586
2,894
4,692
1,410
37,539
2012
5,627
19,040
24,667
10,951
3,244
38,861
43,225
11,822
31,402
4,182
1,164
7,938
662
814
5,148
1,314
5,825
5,136
689
2,113
38,861
2013
5,627
23,779
29,406
13,389
3,867
46,661
46,197
13,682
32,515
5,260
1,740
13,019
772
2,541
8,531
1,176
5,873
5,162
711
7,146
46,661
2014
5,627
27,321
32,948
10,365
4,202
47,516
47,106
15,512
31,593
6,561
5,850
10,024
694
2,490
4,992
1,847
6,512
5,797
715
3,512
47,516
2015
5,630
30,601
36,231
8,879
4,504
49,613
48,193
17,539
30,654
7,765
6,487
10,498
1,102
1,504
4,352
3,540
5,790
4,877
913
4,708
49,613
2016
5,630
34,057
39,687
7,890
4,744
52,322
50,577
19,382
31,195
7,765
6,487
12,972
1,177
1,518
6,074
4,203
6,096
4,970
1,126
6,876
52,322
2017E
5,630
38,115
43,745
7,890
5,031
56,666
54,594
21,320
33,274
7,765
6,487
15,867
1,333
1,767
8,564
4,203
6,726
5,600
1,126
9,141
56,666
(INR Million)
2018E
5,630
42,857
48,487
7,890
5,367
61,744
56,232
23,362
32,870
7,765
6,487
21,840
1,492
1,978
14,167
4,203
7,217
6,091
1,126
14,623
61,744
4
Gujarat State Petronet
Financials and Valuations

Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Fixed Asset Turnover (x)
Leverage Ratios (%)
Net Debt/Equity (x)
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
19 May 2016
2011
2012
2013
2014
2015
2016
2017E
2018E
9.0
11.3
35.6
1.0
13.0
9.3
12.5
43.8
1.0
12.6
9.6
12.9
52.3
1.0
12.2
7.4
10.7
58.5
1.0
15.7
6.4
11.1
64.4
1.2
18.2
7.9
11.2
70.5
1.5
22.2
9.3
12.8
77.7
1.8
22.6
10.9
14.5
86.1
2.1
22.6
18.2
12.7
2.3
8.2
9.3
0.7
21.3
12.2
2.1
8.1
9.3
0.9
17.2
12.1
1.9
8.4
9.6
1.1
14.6
10.6
1.7
7.0
8.0
1.3
12.5
9.4
1.6
5.8
6.7
1.5
28.4
17.0
20.9
23.3
16.0
19.3
19.9
14.5
19.1
13.4
10.8
15.4
12.6
10.3
15.3
11.7
9.7
14.3
12.6
10.5
16.3
13.3
11.1
18.1
0.3
25
0.3
0.3
25
0.3
0.3
53
0.3
0.2
88
0.2
0.2
69
0.2
0.2
56
0.2
0.2
56
0.2
0.2
56
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2011
9,619
-673
-2,122
-1,687
786
5,922
-5,693
229
0
170
-5,523
2
2,139
-1,237
-656
249
648
1,742
2,390
2012
10,241
-730
-851
-1,621
888
7,927
-2,581
5,346
0
440
-2,141
2
-824
-1,552
-654
-3,028
2,758
2,390
5,148
2013
10,591
-473
-1,599
-2,246
654
6,926
-3,822
3,104
0
543
-3,279
0
2,138
-1,494
-654
-9
3,638
4,892
8,530
2014
9,255
-833
-869
-2,068
966
6,451
-2,401
4,050
0
-4,058
-6,459
0
-1,808
-1,601
-658
-4,067
-4,076
9,068
4,993
2015
9,234
-739
-871
-2,195
839
6,268
-2,151
4,117
0
633
-1,518
17
-2,713
-1,389
-658
-4,743
7
4,345
4,352
2016
8,605
-83
-445
-1,994
773
6,856
-2,384
4,472
0
0
-2,384
0
-988
-773
-988
-2,749
1,723
4,352
6,074
2017E
10,094
-173
225
-2,453
706
8,399
-4,017
4,381
0
0
-4,017
0
0
-706
-1,186
-1,892
2,490
6,074
8,564
(INR Million)
2018E
11,299
70
121
-2,866
706
9,330
-1,638
7,693
0
0
-1,638
0
0
-706
-1,383
-2,089
5,603
8,564
14,167
5
Gujarat State Petronet
Corporate profile

Exhibit 1: Sensex rebased
Company description
nd
GSPL is the 2 largest gas transmission company in India
with 2,239Kms of high pressure gas pipeline network and
31mmscmd of firm GTAs for gas transmission to various
industries and CGD networks in the state of Gujarat.
GSPL’s parent, GSPC owns 37.7% stake in GSPL and has
interest in both upstream and downstream businesses.
GSPL as the mid-stream company of the group is the
vehicle for transmission of additional gas production by
GSPC. In FY12 GSPL promoted 2 SPVs (GIGL and GITL) for
implementing 3 cross country gas pipelines.
Exhibit 2: Shareholding pattern (%)
Source: MOSL/Bloomberg
Exhibit 3: Top holders
% Holding
Holder Name
Mar-16
Dec-15
Mar-15
Promoter
37.7
37.7
37.7
GUJARAT MARITIME BOARD
6.6
DII
30.7
30.7
33.8
LIC OF INDIA PENSION PLUS MIXED FUND
4.3
FII
15.4
15.4
10.4
PLATINUM ASIAFUND
2.7
Others
16.2
16.2
18.1
FRANKLIN INDIA MONTHLY INCOME PLAN
2.7
Note: FII Includes depository receipts
Source: Capitaline
IDFC PREMWR EQUITV FUND
2.5
Source: Capitaline
Exhibit 4: Top management
Exhibit 5: Directors
Name
Designation
Name
Name
M M Srivastava
Chairman
J N Singh
L Chuaungo
Atanu Chakraborty
Managing Director
R Vaidyanathan
Shridevi Shukla
Reena Desai
Company Secretary
Yogesh Singh
Bhadresh Mehta
Sudhir Kumar Jain
Source: Capitaline
*Independent
Exhibit 7: MOSL forecast v/s consensus
Exhibit 6: Auditors
Name
Type
Ernst & Young
Internal
Manoj Hurkat & Associates
Secretarial Audit
R K Patel & Co
Cost Auditor
RMA & Associates
Statutory
EPS
(INR)
MOSL
forecast
Consensus
forecast
Variation (%)
FY16
7.9
8.2
-4.1
FY17
9.3
10.4
-10.9
FY18
10.9
11.7
-6.9
Source: Bloomberg
Source: Capitaline
19 May 2016
6
GUJARAT STATE PETRONET GALLERY
GUJS
GUJS
SECTOR UPDATES
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