Reported revenue rose 6% y-o-y (+2% q-o-q) to R2.6 billion (est. of R2.5 billion), primarily led by higher volumes. Despite the revenue beat, EBITDA of R2.2 billion (+7% y-o-y, flat q-o-q) was in line due to higher employee expenses (R144 million v/s est. of R96 million; +27% y-o-y, +82% q-o-q) and opex (R185 million v/s est. of R156 million; +53% y-o-y, +58% q-o-q).
PAT came in line with our estimate of R1.2 billion (-9% q-o-q and -4% y-o-y), led by higher other income of INR218m (est. of INR175m; +78% y-o-y, +49% q-o-q). Q3 transmission volumes were 26.2mmscmd (est. of 25mmscmd; +5% y-o-y, +7% q-o-q). Implied transmission tariff stood at R1,095/mscm (est. of R1,080; +4% y-o-y, +1% q-o-q).
While lower spot LNG prices have been a positive, competitive liquid fuel prices have delayed the expected gas consumption uptick. PNGRB’s pending tariff revision (if above our estimate) will provide an upside (modeling 11% higher tariff in FY18).
We model a transmission tariff of R1,082/mscm in FY17 and R1,200 in FY18 v/s actual R1,095 in Q3FY17 and (b) volumes of 26.0 /29 /32mmscmd in FY17/ FY18/ FY19 v/s actual 26.2mmscmd in Q3FY17.
The medium-term risk is some volumes going away with the start of RIL’s petcoke gasification project. For every 5% variation in volumes/ tariff, earnings change by ~6%. The stock trades at 14.1x FY18E adj. EPS of R11. Our 10x FY19 P/E based TP stands at R163.