GSPL's 4QFY11 profit beat our estimates on account of change in depreciation policy and higher tariff. Hence, we raise our FY12-13e earnings. Key stock triggers are ramp-up in gas supply and clarity about tariff.
n Profit up on change in depreciation policy. GSPL reported higher-than-expected PAT of `1,506m in 4Q owing to change in depreciation policy and higher tariff. The policy change entails cut in depreciation rate on pipeline to 3.17% SLM (straight line method) from 8.33% originally. Transmission tariff was at `806/tcm, higher than our expectation of `780/tcm. Transmission volume was slightly down qoq, at 35.6mcmd.
n Higher LNG imports to fuel growth. We expect transmission volume to grow to 46mcmd in FY13e, at FY11-13e CAGR of +13%, primarily on the back of higher LNG imports.
n Change in estimates. We increase our FY12e and FY13e earnings 15% and 18% respectively, factoring in the change in depreciation policy and 5% decline in our FY12-13e gas transmission volume. We expect FY11-13e earnings CAGR at 9% vs. transmission volume CAGR at 13%.
Key stock triggers are ramp-up in gas supply and clarity about tariff. We maintain Buy. Key risk: lower gas transmission tariffs/volumes
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
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