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Gujarat State Petronet rating – Buy: Q4FY21 Ebitda was ahead of expectations

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We retain ‘BUY/SO’ with revised TP of Rs 342 (earlier: Rs 278) as we roll over valuations to FY23E and it presently trades at 3.0x PE (ex-Gujarat Fuel).

Gujarat State Petronet’s (GSPL’s) Q4FY21 Ebitda of Rs 3.4 bn (-3% y-o-y, -13.6% q-o-q) surpassed our and consensus estimates led by 49% y-o-y dip in opex because of low compression price as volumes dipped.

Key highlights: (i) Present volumes are ~35mmscmd, however June is more likely to exit at ~40mmscmd. The shortfall in CGD/energy volumes is being compensated by addition of ~4mmscmd Reliance volumes; (ii) the Anjar-Chotila pipeline must be commissioned by Dec 2021, which is more likely to increase incremental ~5mmscmd volumes from CY22; (iii) web tariffs fell 13.7% y-o-y as low stress pipelines because of decrease volumes didn’t require compression. Strong Rs 50 bn FCF over FY21-23e and Rs 20 bn in FY21 will assist GSPL flip debt free. Retain Purchase.

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Spectacular CGD volumes partly offset weak refining demand in This autumn: Whereas GSPL’s volumes declined to 33.8mmscmd (-8% y-o-y, -14% q-o-q), CGD volumes have been at an all-time excessive—up 23% y-o-y. Refining client volumes plunged 31% y-o-y and energy by 17% as spot LNG costs surged by 163% y-o-y. Q1FY22 may even see solely a modest restoration to ~37-38mmscmd given Covid-led cutbacks and pretty excessive spot LNG costs of ~$10/mmbtu.

Plentiful fuel provide to drive volumes: Home new fuel is plentiful—Reliance’s 10mmscmd+ and Vedanta’s 4.2mmscmd+. As well as, capability expansions are geared to offtake from new LNG terminals and assist cross-country pipelines of its subsidiaries for enlargement exterior Gujarat. GSPL is the only real off-taker for Mundra LNG terminal’s ~9mmscmd volumes (incremental ~5mmscmd). GSPL enjoys the quickest development amongst pipeline corporations – 2x volumes over four-five years.

Outlook: Enticing–GSPL is the important thing beneficiary of further LNG to be imported in India to bridge the demand-supply hole. Its web debt/fairness plunged to 0.1x and OCF stays wholesome at Rs 29 bn in FY21. We retain ‘BUY/SO’ with revised TP of Rs 342 (earlier: Rs 278) as we roll over valuations to FY23E and it presently trades at 3.0x PE (ex-Gujarat Gas).

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