buy’ GSPL –Target Price Rs.140

 2QFY12 revenue at Rs.281 crore has beaten market estimates on better than expected gas
transmission tariff of Rs.835 /tcm as against the market expectation of Rs.750 /tcm.
 Volume of 35.2 mmscmd was below the street estimate of 37 mmscmd.
 EBITDA of Rs.258 crore and EPS of Rs.2.3 have beaten market estimate by 11% each.
 However, it seems that the market has not enthused much from better than expected numbers
because of stagnated volume over four quarters. Better than expected margin and EPS are primarily due to higher than market expected tariff and it is unlikely to sustain.
 The stock is trading below the fair value because the market expects the regulator to cut gas transmission tariff to a level lower than the market expected tariff of Rs.750 /tcm.
 The stock is recommended with a target price of Rs.140 over one year. Risks to the target price are lower than expected gas transmission volume and lower than expected transmission tariff.