>GUJARAT STATE PETRONET LIMITED (PRABHUDAS LILLADHER)

Volumes slump; no GSEDS contribution

■ Transmission volumes remain lower: The benefit of lower naphtha prices continued in Q4FY09, due to which Gujarat State Petronet’s (GSPL’s) gas transmission volumes were impacted; volumes dropped by a whopping 28.5% YoY and 3.1% QoQ to 12.7mmscmd (Q4FY09– 17.7mmscmd). However, due to a tariff hike in January 2009 and payments from certain take or pay contracts, the revenues jumped by 13.7% YoY to Rs1.3bn (Rs1.2bn).

■ Higher staff costs, O&M expenses depress EBITDA margins: GSPL provided for arrears on salary revision with a consequent jump in staff costs by 39.9% YoY and 97.3% QoQ to Rs47m (Rs34m). O&M expenses climbed on account of higher compression costs during the quarter. Gas
transportation charges arose due to utilisation of another distribution player’s network (Sabarmati Gas). These charges are expected to remain for next few quarters. EBITDA margins, thus, declined by 320bps YoY to 85.5% (88.7%). However, operating profit increased by 9.6% YoY to Rs1.13bn (Rs1.03bn)

■ PAT declines by 14.3% YoY: Depreciation and interest costs remained more or less flattish during Q4FY09. Effective tax rate during Q4FY08 was low at 19.1%, while it was at 34.9% in Q4FY09. Due to this, PAT declined by 14.3% YoY to Rs348m (Rs406m).

■ Valuations: By March FY10, GSPL’s transmission volumes are anticipated to scale-up to 40mmscmd from the current 30-31mmscmd. The volume growth is, thus, expected to remain buoyant over the next couple of years. However, the overhang on contribution towards GSEDS still
remains. GSEDS contribution will be earnings dilutive for the shareholders. Hence, we maintain our ‘Reduce’ rating on the stock.

To see full report: GSPL