Dear All,
Gujarat State Petronet Limited is first company in India to transport natural gas on open access basis and is a Pure Natural Gas Transmission Company.
The Gujarat State Petronet Ltd stock has undergone a drastic correction, more than halving in value from its high of Rs.110 currently quoting at around 26. The recent hammering was more pronounced due to the forced direction from the Gujarat Govt to contribute 30% of PBT for Social projects.
GSPL has a focussed business model as a transporter of natural gas in Gujarat without any exposure to commodity price risk. It would not matter for this company whether Gas prices are going up or down because they don`t own any gas. It is well-positioned in the Gujarat gas market with its pipelines connecting gas sources to existing and developing markets. GSPL is also venturing into city gas distribution through investment in group companies engaged in the lucrative and growing markets.
GSPL will see a doubling in pipeline capacities and quadrupling of Revenues over the next 4 years..the stock should become a core infrastructure play .
Gujarat-The Biggest Natural Gas Consumer :::Gujarat currently moves 18mmscmd of gas per day whereas demand is expected to shoot up to 95 mmscmd by 2010.
GSPL has picked up strategic stakes in group companies — GSPC Gas, Sabarmati Gas and Krishna Godavari Gas Network Ltd — that are setting up city gas businesses in Gujarat and Andhra Pradesh. City gas distribution, which includes supply of compressed natural gas for automobiles, will be a natural diversification for GSPL from its transportation business.
RISKS:
Tarrif Regulations, delay in Gas production from KG basin, 30% allocation to Social projects as mandated by Guj Govt and higher debt.
This is a simple business model which makes money
year in and year out without any glamor associated. Peter Lynch and Warren Buffet would love to invest in this one. And me too.
Investors can buy the stock with a medium to long term view. The Stock should be a steady performer and a Good Dividend play.
Best of luck,
Srikanth Shankar Matrubai,
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2 comments:
guj.govt order of setting aside 30%PBT will be materialised,ifnot this year definitely next year.Why i feel like this because GSFC passed aresolution keeping aside 30%PBT for social purposes. If you apply the same here the30%PBT comes around 45%PAT.That means the estimated EPS for 08-09 will around rs 1.75.not only this from09-10onward every growth one rupee ,shareholders will forgo 45%of it for socialpurpose . this is biggest risk materialed ,keeping other risk .
Another risk if RNRL wins the case against RIL regarding KG gas GSPL willnot any have gas to transport ,because the gas willbe transporte on whims and fancies of RNRL.
please comment on the entry and still DO you feel it advisable to buy at this price?
Yes, I have analysed even this Fallout of the Guj Govt's (foolish) order. And I still believe this is a good buy with a Long Term View.
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