We recently met the management of Gujarat State Petronet Ltd (GSPL) and are positive about the growth prospects of the company.
The supply of gas to Torrent Power Plant is expected to commence from October 2008 with 1.5 MMSCMD for its first turbine. We expect the company to ramp it up to 3 MMSCMD by March 2009 and finally to 4.5 MMSCMD by June 2009.
Although the contract is delayed from our earlier estimates the company is already enjoying take or pay benefits. It has already booked revenues to the tune of Rs35 million in FY08.
We expect the gas from KG basin of Reliance to start flowing from November 2008. This would led to next level of growth in the volumes transported as the company has already signed long term gas transmission agreements with Reliance of 11 MMSCMD which is expandable to 20 MMSCMD.
In line with the heavy demand and expected supply of gas, GSPL has already chalked out its aggressive expansion plans. The company has already expanded its pipeline network from 510 km in March 2006 to 1130 km as of March 2008.
In FY09 it would commission 250 km pipeline from Rajkot to Jamnagar and Bhadbhut (Bharuch) to Gana (Anand) plus few spur lines thereby taking the total to 1380 km by November 2008. It is also likely to commission 225 km pipeline from Morbi to Mundra by June 2009 thereby taking the total pipeline network to 1605 km.
We feel GSPL is uniquely poised to take advantage of the massive opportunity in transporting gas across India through its pipelines and also participate in the city gas distribution projects.
We remain positive and maintain BUY on GSPL with revised price target of Rs90, (Rs96 earlier), which provides 40% upside potential from current levels.