Gujarat State Petronet Q1 Review - Result Beats Expectations On Higher Volumes; Maintain Hold: Systematix

Systematix Research Report

Gujarat State Petronet Ltd.'s Q1 FY25 Ebitda/profit after tax was slightly higher than expected on the back of higher-than-forecasted volume and lower-than-estimated other expenses.

GSPL repeated strong volume growth of 24% YoY/9.1% QoQ to 36.4 million metric standard cubic metre per day, led by a sharp rise in the power segment 57.9% YoY (116% QoQ), followed by fertilizer 30% YoY (-3.4% QoQ) and city gas distribution 20.8% YoY (10.2% QoQ).

Petroleum and Natural Gas Regulatory Board released an order tariff in April 2024 for revising the levelized tariff of GSPL HP gas grid from Rs 34/metric million British thermal unit to Rs 18.1/mmbtu. The revised tariff was applicable from May 1, 2024, hence the implied tariff dipped to Rs 0.98/standard cubic metre from earlier Rs 1.33/scm in Q4 FY24.

Consequently, the revenue declined sharply by 19.7% YoY to Rs 3.5 billion (-30.1% QoQ), while opex/scm saw a significant drop of 58.9% YoY/62% QoQ (supported by a decline in gas transmission expense) due to which Ebitda was down by just 10.5% YoY/20.4% QoQ to Rs 3 billion.

We raise our volume estimates from earlier 33/34.5 mmscmd to 35/36.8 mmscmd for FY25E/FY26E, respectively. Consequently, we raise our Ebitda/PAT estimates by 8.8%/7.6% for FY25E and 9%/7.4% for FY26E.

We forecast Ebitda/PAT to see a decline of 28%/23% over FY24-FY26E led by a recent 47% tariff cut. On the back of higher Ebitda estimates, we are raising our SOTP-based target price to Rs 364 (earlier Rs 327), valuing its core business at Rs 142, its 54% stake in Gujarat Gas at Rs 205 (with 50% holding discount) and its investment in GIGL and Sabarmati Gas at Rs 17. We continue to maintain Hold on the stock.

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