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EBITDA lower than our estimates; Higher volumes a surprise while tariffs decline impact the earnings

Our View

GSPL's Q4FY24 performance presents a mixed picture, EBITDA and PAT witnessed YoY growth of 28.3%/16.5%, but flat QoQ despite an increase in volumes due to a decline in tariffs. Volumes at 33.4mmscmd surpassed our expectations of 30.8mmscmd, on better refinery and other sector demand. However, higher-thanexpected decline in tariffs (Rs 1.495/scm) offset the volume strength. While managing cost pressures remains crucial, we maintain an Add rating on GSPL with a revised target price of Rs 329 (earlier Rs 487).

Result Highlights

* EBITDA/PAT at Rs 3.8/2.6bn, up 28.3%/16.5% YoY on better volumes; but flat QoQ despite an increase in volumes due to a decline in tariffs. The EBITDA performance is lower than our estimates on higher-than-expected decline in tariffs. The other expenses declined (as gas transmission expenses in Q4FY24 declined to Rs 521mn vs Rs 987mn in Q3FY24 vs Q4FY23 of Rs 690mn).

* Transmission revenues stood at Rs 4,490mn adjusted for gas transmission expense (Rs 521mn) was up by 21.8% YoY and 3.3% QoQ.

* The overall volumes for the quarter at 33.37mmscmd were up 33.1%YoY and 15% QoQ (Q3FY24 – 29.2mmscmd and Q4FY23 – 25.08mmscmd), was higher than our est. of 30.8mmscmd on better refinery and other sector demand. The volumes sequentially increased by 4.4mmscmd mainly driven by refinery sector which was up by 2.3mmscmd, other sectors up by 1.1 and CGD by 0.6. Overall, the YoY increase was 8.3mmscmd, driven by all sectors which were up 1-2mmsmcd each - CGD which was up 1.5mmscmd; power 1.7; others 2.1; fertilizers 1.0 and refinery 2.0.

* EBITDA/PAT Rs/mmscmd at 113/78 was down 3.6/12.5% YoY and 13.4%/13.3% QoQ on a decline in tariffs.

* The gas transmission expense of Rs 521m, which is a pass-through, adjusted for the same which has resulted in a tariff of Rs 1.495/scm, which is lower YoY and QoQ.

* The other income at Rs 296mn was down 38% YoY but up 40.5% QoQ.

* FY24 performance: EBITDA/PAT at Rs 15.0/12.8bn, up 19.5%/35.9% YoY on better volumes. Total volume (mmscmd) stood at 30.5 vs 25.4 in FY23, which is up 20.2% YoY. This increase of 5.1mmscmd was led by power sector which stood at 3.4 vs 1.0 in the same period prior year; CGD at 10.9 vs 9.5 in last year; others at 5.1 vs 3.8 last year; fertilizers at 4.3 vs 3.6 last year; while refinery witnessed a decline to 6.8 vs 7.4 last year.

Valuation

GSPL’s FY24-26 EBITDA would decline at a CAGR of -5.5% despite a 10.2% volume growth due to a fall in tariffs. At the CMP, the stock trades at 12.3x/10.7x FY25e/FY26e EV/ EBITDA and 1.5x/1.4x P/BV (excl. investments, it trades at 4.4x/3.5x FY25e/FY26e EV/EBITDA and 0.6x/0.6x P/BV). We maintain an ADD rating on the stock, at a revised TP of Rs329, valuing it on a sum-of-parts basis (core business at Rs158 at 5.0x EV/EBITDA, investment value in GUJGA at Rs171).

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