IGI Logo

GSPL’s 3QFY24 standalone EBITDA was in line with JMFe at INR 3.8bn (slightly lower than consensus of INR 3.9bn) as lower transmission volume was offset by slightly higher transmission margin. Implied transmission EBITDA margin was marginally higher at INR 1,343/tcm vs. JMFe of INR 1,320/tcm as weighted average tariff was higher QoQ at INR 1,797/tcm in 3QFY24 (vs. INR 1,750/tcm in 2QFY24) probably due to likely take-or-pay income; cash opex was higher at INR 454/tcm (vs. INR 317/tcm in 2QFY24). However, transmission volume was down 3.9% QoQ at 29mmscmd (vs. JMFe of 30.5mmscmd), primarily on account of decline in gas demand in the power and others segment, though it was partly offset by growth in refinery/petchem, fertiliser and CGD segments. We maintain BUY (revised TP of INR 400) as most of GSPL’s value is driven from its stake in Gujarat Gas (GGas), whose business we like as we expect its volume growth to sustain in the medium to long term.

* EBITDA in line with JMFe as lower transmission volume was offset by slightly higher transmission margin: GSPL’s 3QFY24 standalone EBITDA was in line with JMFe at INR 3.8bn (though it was slightly lower than consensus of INR 3.9bn) as lower transmission volume was offset by slightly higher transmission margin. PAT was also in line with JMFe at INR 2.6bn (but lower than consensus of INR 2.9bn). Implied transmission EBITDA margin was slightly higher at INR 1,343/tcm vs. JMFe of INR 1,320/tcm (though it moderated from INR 1,433/tcm in 2QFY24) as weighted average tariff was higher QoQ at INR 1,797/tcm in 3QFY24 (vs. INR 1,750/tcm in 2QFY24) probably due to likely take-or-pay income; cash opex was higher at INR 454/tcm (vs. INR 317/tcm in 2QFY24).

* Transmission volume down 3.9% QoQ at 29mmscmd due to sharp decline in power sector gas demand: Transmission volume was down 3.9% QoQ at 29mmscmd (vs. JMFe of 30.5mmscmd), primarily on account of decline in gas demand in the power and others segment, though it was partly offset by growth in refinery/petchem, fertiliser and CGD segments. The break-up of 1.2mmscmd QoQ decline in volume (Exhibit 4) is: a) Power segment volume declined sharply by 1.6mmscmd QoQ to 2.5mmscmd; b) Others segment also saw volume decline by 0.6mmscmd QoQ to 4.6mmscmd; c) CGD segment volume grew marginally QoQ to 10.9mmscmd; d) Fertiliser segment volume also increased only by 0.1mmscmd QoQ to 4.7mmscmd; while e) Refinery/Petchem segment volume recovered by 1.0mmscmd QoQ to 6.4mmscmd.

* Maintain BUY due to our positive view on GGas’ business model: We maintain our estimates; however, TP rises to INR 400/share (from INR 380) due to rise in value of its stake in Gujarat Gas (which we value at CMP less 40% holding discount). We maintain BUY as most of its value is driven from its stake in GGas and we have a positive view on GGas’ business as we expect its volume growth to sustain in the medium to long term. Our TP of INR 400 comprises: a) INR 173 for the existing pipeline business based on a DCF valuation, b) INR 222 for its 54.17% stake in GGas based on a 40% discount to CMP and c) INR 6 for its 27.5% stake in Sabarmati Gas based on 10x FY23 PAT. At CMP, GSPL is trading at 1.8x FY26 P/B (3-year avg: 1.7x).

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361