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GSPL posted a 17% EBITDA beat at Rs4.1bn in Q2FY24, led by 13% higher than expected tariff of Rs1.59/scm (up 11% QoQ) owing to a greater share of HP in the mix, amid largely in-line volume. Q2 PAT came in at a 25% beat, at Rs5.3bn, due to lower ETR of 15% (from Gujarat Gas dividend). GSPL’s H1 capex stood at Rs3.3bn vs. Rs462mn YoY/1.98bn HoH, implying rebound in the capex cycle which should lead to favorable tariff revision—albeit, still awaited. Gas transmission volume rose 3% QoQ to 30.2mmscmd (up 23% YoY, in-line) and fertilizer/CGD/others’ offtake was up 1.2/0.4/0.3mmscmd QoQ, while refinery volume fell 1.1mmscmd. We raise FY24E/25E EPS by 22-23% each, to build-in higher Other Income (H1 rate) and slightly higher volume. We maintain BUY with revised Sep-24E TP of Rs335 (roll-over gains offset by lower GUJGA FV).

Gujarat State Petronet: Financial Snapshot (Standalone)

Result Highlights

GSPL’s Q2FY24 SA EBITDA/PAT of Rs4.1bn/Rs5.3bn was up 23%/69% YoY and 22%/2.3x QoQ. Tariff realization rose 11% QoQ to Rs1.59/scm, on higher share of highpressure (HP) gas grid volume (up 1.55mmscmd, while LP was down 0.7 mmscmd) and swapping benefits. Other Expenses fell 26% YoY/36% QoQ to Rs261mn, while employee cost rose 5% YoY and QoQ to Rs169mn. For Q2, GSPL’s gas transmission expense rose 53% YoY and 60% QoQ to Rs760mn. Depreciation rose 2% QoQ to Rs477mn. Electricity income was up 15% YoY to Rs122mn (up 21% QoQ). EBITDA/scm rose 17% QoQ (an 18% beat) to Rs1.48 (flat YoY). Other Income was in-line, at Rs2.7bn, up 2.6x YoY, with higher GUJGA dividend payout. Tax rate was lower, at 15%. Cash balance fell 24% HoH to Rs5.3bn, mainly due to Rs1.5bn investments in JVs, etc (as indicated in the cashflows).

Management KTAs

Tariff realization was up, as HP grid volume share was higher. There is no further update on the tariff review, which is though still awaited. Capex was largely for Chhara LNG terminal connectivity. Investments include infusion on GIGL at SA level and GSPC LNG by Gujarat Gas at a consolidated level. GIGL/GITL’s net share loss was Rs132.2/5.8mn. Share of profit from associate/JV was Rs99mn, supported by Sabarmati Gas.

Valuation and Outlook

We value GSPL on SOTP basis, with TP of Rs335/sh, comprising of core business (using DCF method) at Rs133/share (implied Sep-25E target SA P/E of ~13x), GUJGA's stake at Rs175/share, building-in 40% holdco discount to our FV/TP, and Rs28/share derived from stake in Sabarmati Gas & new pipelines. GSPL’s upcoming tariff review (we buildin ~30% effective cut) is crucial to our medium-term earnings visibility, as the stock continues to trade at attractive valuation. We cut our 12M TP by ~1%, as our lowered FV for GUJGA, from Rs480 to Rs440 is offset by the roll-over. Key risks: Adverse oil-gas prices/demand, industrial slowdown, cost overruns, project delays & regulatory aspects.

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