Friday, June 13, 2008

Investment Idea: GSPL

Gujarat State Petronet
Low risk, high growth
The company offers low risk bet on opportunities thrown up by almost doubling of gas supplies in India over the next two years.
Buy Gujarat State Petronet
BSE Code 532702 NSE Code GSPL
52-week High/Low Rs 114 / Rs 50
Current Price Rs 60
Inadequate gas supply has constrained growth of gas consumption in India. There is large unmet demand for gas with several existing users not getting enough gas and several potential consumers not getting any gas. As the natural gas supply in India is expected to almost double in the next couple of years, the Indian natural gas sector has become an attractive investment avanue. Since the demand is supply and infrastructure driven, there is huge potential across the gas value chain at the upstream, transmission and distribution sectors.
Low risk, high growth
The transmission segment has the lowest business risk in the gas value chain. This is due to negligible price risk and absence of competition due to natural monopoly. This makes the companies operating in this segment very attractive. One such company is Gujarat State Petronet (GSPL) which offers its transmission network in Gujarat on open access basis. It offers the best visibility among listed gas transmission utilities on volume growth based on already tied up contracts
Currently GSPL’s pipeline capacity is 40 mmscmd, but it carries less than 20 mmscmd due to non availability of gas. However, as the gas supply in India is likely to double over the next couple of years and Gujarat being one of the most gas conscious state, gas transported through GSPL will almost double over the next two years. This makes GSPL one of the best picks in the Indian gas utilities space, being most highly levered to increasing and visible domestic gas supplies.
GSPL is a gas transmission company with a network of pipelines in the western Indian state of Gujarat. It has a gas transmission network comprising over 1,100 kms of pipeline connecting Hazira, Vadodara, Ahmedabad, Kalol, Himmatnagar, Mehsana, Rajkot, and Vapi. GSPL's network connects all major supply sources in Gujarat to important consumption centres in the state and transports 18-19 mmscmd of gas.
Reliance Industries’ commencement of supply of KG Basin gas will be a major booster
Reliance Industries (RIL) has signed 15 year agreement with GSPL to transport 11mmscmd of gas in Gujarat from mid-2008. RIL is expected to start the supply of KG Basin gas during the second half of calendar year 2008 which will be initially of 40 mmscmd of gas which can be increased to 80 mmscmd at peak level (thus doubling the gas production in India from around 80 mmscmd in FY 2008 to around 160 mmscmd by FY 2010), within one year from the date of commercial production.
The transmission pipelines are set to be utilized much more efficiently with RIL commencing the production of natural gas in KG basin by second half of FY09. The idle capacity is to be brought to use with GSPL carrying 11-20-mmscmd of RIL gas in Gujarat for RIL’s captive use as well as for other consumers The existing pipeline grid itself would suffice for transmission of the additional gas from RIL.
GSPCL’s gas supply ensures GSPL’s long term growth
GSPL’s parent Gujarat State Petroleum Corporation (GSPCL) has made a large gas discovery in the KG basin. GSPCL is set to start gas production from KG basin after FY 2010, which could boost GSPL’s volumes by further 10-15 mmscmd.
There is scope for further accretion of reserves as GSPCL has several other exploration blocks in highly prospective basins. GSPC has 26 exploration blocks allotted under the NELP regime with 10-80% interest. Of its 26 NELP blocks six are in the highly prospective KG basin. Six other blocks are in the eastern offshore region in the Cauvery and Palar basin to the south of the KG basin. It also 12 other blocks in basins like Mumbai offshore, Cambay and Rajasthan, where commercial oil and gas discoveries have been made. It also has 11 pre-NELP blocks.
GSPL to gain from GSPCL’s role as gas aggregator in Gujarat
GSPCL, besides being a gas producer, is emerging as a gas aggregator in Gujarat, too. GSPL gets to transport most of the gas GSPC has marketing rights to. GSPC has a pool of 16 mmscmd of gas of which GSPL transport 15.5 mmscmd. Thus most additional imported LNG supplies are and will be routed through GSPL.
Gujarat to remain and will continue to remain the most favoured destination for gas supplies
Gujarat is the largest gas consumer and accounts for 30% of India’s gas consumption currently. This is because a large part of Indian gas production lands up in Gujarat either to be consumed or for onward transportation to northern India. Over 80% of India’s current gas production is produced in Gujarat onshore and Mumbai offshore region. A large part of Mumbai offshore lands up at Hazira in Gujarat and then is transported out of the state by the HVJ pipeline. Another reason is that both the operating LNG import terminals in India are located in Gujarat. Moreover, Gujarat is one of the most industrialized states in India and therefore has large gas demand.
Gujarat’s share in gas consumption to remain high atleast for the next 3-4 years
Most of the incremental gas production in India will come from the eastern offshore region. Gujarat will however continue to retain a share of 30% in Indian gas consumption even in FY12. There are large gas consumers like NTPC and RIL in Gujarat. This is because a significant portion of the gas produced in the eastern offshore region will get transported to Gujarat.
GSPL has 1,130 km of trunk and spur transmission network with a transportation capacity of 40-50 mmscmd. All the pipelines of GSPL are bidirectional, implying that in these pipelines can be used to transport gas in either direction. The flexibility such a network provides is likely to prove useful in future as gas flows into Gujarat from multiple sources. It also offers the best pipeline connectivity in Gujarat.
Capacity expansion to continue
GSPL is all set to expand its pipeline from 1,180 km to 2,000 km. The extension plan of another 800-900 km of pipeline will be operational in different phases by FY2010. The pipeline will connect to Pipavav port in South Gujarat and will extend to Mundra in West Gujarat. Further, the Company is developing several spur lines to connect Industrial clusters and medium size customers along the pipeline network. The Company has taken up development of spur lines in Vapi, Morbi, Mehsana and Baroda regions on priority basis. The company is likely to invest Rs 1100 crore by FY 2010 on extending its network.
Strategic stakes to add value
The Company has aquired strategic stakes in Krishna Godavari Gas Network Limited (planning to develop gas transmission & CGD (Compressed Gas Distribution) network in Andhra Pradesh), GSPC Gas Company Limited and Sabarmati Gas Limited which are developing CGD Network in the State of Gujarat. Increased availability of gas for automobiles in Andhara Pradesh as well as Gujarat will boost the business prospects of these subsidiaries/ associates, bring additional value.
Source: Internet

Markets Today

Markets Snapshot
Markets end in the red amid volatile day of trade.
Inflation for week ended May 31 at 8.75% Vs 8.24%
Sensex ends down 60.5 pts at 15189; NIfty ends down 22.2 pts at 4517
CNX Midcap Index down 0.22%, BSE Small-cap Index up 0.74%
Realty Index continues to drag; index down 2.5%; DLF down 3.5%, Unitech down 0.7%
BSE Metal Index down 2%; Sterlite down 4.1%, SAIL down 2.15%
Index losers; Tata Comm down 5.2%, Tata Power down 4.5%, Suzlon down 3.9%
BSE Healthcare Index up 1.2%; Ranbaxy up 4.2%, DRL up 3.5%
Buzzers; GHCL up 13.2%, Asian Elec up 10.5%, NFL up 20%, Sintex up 11%, Vaibhav Gems up 20%
Fertliser stocks: Chambal fert up 9.5%, Madras Fert up 9%, RCF up 5%
Losers; Indiabulls Real Estate down 5.5%, RPG Life down 8.5%, Bajaj Auto Fin down 12.4%
Total market turnover at Rs 58736 cr Vs Rs 72145 cr yesterday
F&O turnover at Rs 41003 cr Vs Rs 52334 cr yesterday
F&O Snapshot
Nifty futures continue to witness short build-up; discount widens to 35 poitnts
Large cap like SAIL, DLF, HDFC bk continue short build-up
ranbaxy witness shoryt covering coupled with soem speculative buying
Fertilisers sees fresh long build-up
Options: Nifty 4400 put adds 2.7 lakh shares, Nifty 4600 call adds 3.1 lakh shares
Star Trade:Chambal Fert up 8%; adds 65 lakh shares ( 70%)
Long Unwinding:Rnrl dn 4.7%; sheds 10.5 lakh sharesIfci dn 4.7%; sheds 10.7 lakh shares
Long Build Up:Chambal Fert up 8%; adds 65 lakh shares ( 70%)Hotel Leela up 4.1%; adds 3.9 lakh sharesOthers : Naga Fert, Ongc , JPA , DCB, Indus Ind,
Short Covering:Ranbaxy up 4.3%; sheds 7.2 lakh sharesOthers : Idfc, Punj Lloyd
Fresh Short:Sail dn 3%; adds 15.6 lakh sharesDlf dn 4.2%; adds 9.5 lakh sharesHdfc bank dn 3.8%; adds 1.9 lakh sharesSuzlon dn 4%; adds 11.6 lakh sharesOthers : Tata Comm, Gmr Infra, Sterlite Ind, SBI, Jsw Steel
Markets This Week
Sensex, Nifty down 2.5% each
Sensex recovers nearly 500 points from week's low of 14,645.3
CNX Midcap, BSE Small Cap Indices down over 1.5% each
BSE IT Index down 5.5%; TCS, Infosys & Satyam down 6% each
BSE Realty Index down 9%; DLF down 7%, Unitech down 8.5%
Index Losers: Suzlon down 12.5%, Tata Comm down 12%, ONGC, HDFC down 10%, JP Assoc down 11%
Index Gainers: Ranbaxy up 12% at Rs 567, Daiichi to buy promoter stake at Rs 737/sh
Index Gainers: BHEL up 9.5%, RPL up 7.5%, DRL up 4.5%, NALCO up 4%
Midcap Gainers: GHCL up 42%, Aurobindo Pharma up 17%, Chambal Fert up 13%
Midcap Gainers: Fortis Healthcare up 15%, Nagarjuna Fert up 10%
Source: moneycontrol.com

Stock Idea: PVR

Religare research has maintained buy rating on PVR with target price of Rs 391 in its June 12, 2008 report. "PVR has registered 33% YoY growth in its standalone quarterly revenue to Rs 543 million with a PAT growth of 23% to Rs 27 million. For the full fiscal, the company has recorded consolidated revenues of Rs 2.7 billion (50% YoY growth), which was 5% higher than our estimate. Consolidated net profit for FY08 came in at Rs 216 million (up 200% YoY). Theatre screen additions, better ticket prices and an increased contribution from its movie subsidiary aided PVR's growth. Although the operating margin was under pressure due to higher rent costs, the overall margin was stronger on a yearly basis"
"We have revised our financial projections for FY09 and FY10 to factor in later-than-expected roll-outs of certain screens. We now expect earnings to grow by 39% and 68% during FY09 and FY10 respectively. Post-estimate revision, our price target reduces from Rs 416 to Rs 391. We maintain a Buy on the stock" says Religare report.

Intraday Trading Calls for 13th June

Indian Stock Market may open flat to positive and remains volatile. A positive closing with small rally expected today.
Today's Intraday Stock Tips/ Trading Calls:
SATYAM COMPUTER
VOLTAS
UNITECH
YES BANK
IDEA
RPL
For Levels and Targets CLICK HERE.
Others: Neyveli Lignite & Mercator Lines may see good rally.
Short-Med Term Delivery Buy Prajay Engineers 531746 (148) Target 190+ SL Below 135
Short Term Delivery Buy Indiabulls Securities 532960 (95) Target 125+ SL Below 86
Corporate News
Pfizer may counter bid for 65% non-promoter stake in Ranbaxy. (BS)
Reliance Industries to sell natural gas this year at US$25.20/barrel of crude oil equivalent. (FE)
L&T has postponed listing of its infotech business to the second half of 2009-10. (ET)
Wipro is bidding for 12 contracts worth US$1.2bn. (BL)
NMDC may increase iron ore prices by 65% for lumps and 88% for fines. (BL)
West Bengal government to offer 25 acres of land near Kolkata Airport to ICICI Bank. (ET)
L&T will invest US$6bn in the power generation business over the next five years. (DNA)
Sanofi-Aventis sues Sun Pharma for infringement of a US patent for Uroxatral. (DNA)
Videocon Group to set-up a solar power plant in West Bengal. (DNA)
IOC plans to set-up mini liquefaction plants to source gas from the marginal fields. (BL)
Oil India plans to launch IPO by September 2008. (DNA)
ADAG Group pulls out of Mumbai sea-link project citing state government’s indecisiveness over awarding the contract. (BS)
PNB receives not from RBI for 51% stake in Bhutan venture. (BL)
IFCI allows LIC to pare its stake to 8.39%. (BL)
Jet Airways has pulled out of negotiations to buy a strategic stake in SpiceJet. (BS)
Moody’s assign Baa3 rating to Tata Chemicals. (FE)
GMR Group forays into security services training academy in Andhra Pradesh. (BS)
Mercator Lines is planning to acquire a jack-up rig with an investment of Rs15bn. (ET)
Central Bank plans to raise Rs15bn from the market by December. (ET)
PSL wins an order from GAIL for supply of coated line pipes valued at Rs19.28bn. (BL)
Educomp to implement computer-aided learning in select schools in Andhra Pradesh. (BL)
SpiceJet expects to report a loss of Rs0.8-1bn in the current year. (BL)
Welspun Group plans to start an e-commerce portal in US to expand its customer base. (BS)
ABG Shipyard bags two orders worth Rs3.05bn. (ET)
Spentex Industries to further reduce workforce over the next six months to cut cost. (DNA)
Good Luck

Disclaimer

The information in this publication is provided by http://www.moneybazzar.blogspot.com/ is intended for use for Readers & Traders . Every effort is made to provide accurate information, but http://www.moneybazzar.blogspot.com/ cannot guarantee the accuracy of the information or of the market analysis. This is a newsletter and is for informational purposes only. It is not a solicitation or offer to buy or sell futures. There is a high risk of loss in trading futures. You should not trade with money that you cannot afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this newsletter. The past performance of any trading system or methodology is not necessarily indicative of future results.



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