Transmission volume growth continues
Standalone net sales were 6% higher than our est. at INR5.4b (-10% YoY), led primarily by higher than expected transmission volume and marginal improvement in implied tariff. Revenue in 2QFY19 included one-time retrospective adjustment in tariff; resulting in gas transportation in the quarter declining 10% YoY at INR5.3b. EBITDA was down 15% YoY at INR4.4b and PBT down 15% YoY (+16% est. led by lower interest cost) at INR3.9b. The company re-measured its DTL of INR12.8b, in line with adoption of the new lower tax rate. PAT was up 41% YoY to INR4.5b. For 1HFY20, EBITDA was down 2% YoY at INR8.4b, while PBT was flat YoY at INR7.0b. With re-measurement of DTL during 2QFY20, resulting PAT was 41% higher YoY to INR6.6b. Transmission volume for the quarter was 12% higher YoY at 39.2mmscmd (up 8% to 38.7mmscmd for 1HFY20). Implied tariff has improved marginally QoQ to INR1,461/scm; however, the same has declined as against INR1,810/scm (includes one-time retrospective adjustment) in 2QFY19 (also down 2% YoY to INR1,440/scm in 1HFY20).
Volumes were higher owing to increase in CGD and Power consumption
* CGD stood at 10.6mmscmd (+31% YoY; +3% QoQ)
* Refinery/Petchem stood at 12.9mmscmd (-12% YoY; -3% QoQ)
* Fertilizers stood at 4.3mmscmd (+3% YoY; +13% QoQ)
* Power stood at 5.9mmscmd (+29% YoY; +18% QoQ)
* Others stood at 5.1mmscmd (+46% YoY; -5% QoQ) Project details:
* GUJS will be awarding EPC soon for the Dahej-Bhadbhut pipeline, which will assist in the off-take of volumes at Dahej.
* Company has also received approvals from PNGRB for developing connectivity for an upcoming RLNG terminal at Chhara.
* PNGRB approval is awaited for the Anjar-Chotila pipeline for evacuation of entire RLNG quantity from the Mundra terminal.
Valuation and view
* The National Green Tribunal (NGT) in Jul’19 has directed the Central Pollution Control Board (and respective State PCBs) to fix the cost of damage done to the environment by critically and severely polluted industrial clusters within three months.
* As India flexes its muscle against industrial pollution, adoption of natural gas by industries bodes well for gas transporters like GUJS (report).
* Transmission volume growth in 1HFY20 was aided by higher off-take at Morbi industrial cluster (GUJGA volumes averaging ~5.2mmscmd) as well as higher volume for the power sector. We keep our transmission tariff unchanged at INR1,477/mscm for FY20/FY21 with transmission volume estimate at 37mmscmd/38.5mmscmd. However, since the company has adopted lower tax rate, its transmission tariffs are under consideration for reduction by PNGRB.
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