SNGPL Posts 80% Profit Growth in FY24

Sui Northern Gas Pipeline Limited (SNGPL) has announced its financial results, wherein the company has reported a profit after tax of Rs. 18.97 billion for the fiscal year 2023-24, up 80 percent compared to Rs. 10.56 billion in the same period last year. SNGPL posted an EPS of Rs. 13.01, up 280 percent YoY and 123 percent QoQ. According to Topline Securities, the significant jump in earnings is on the back of a higher rate of return allowed to SNGP to the extent of 26.22 percent for the full year of FY24 compared to the previously determined rate of return of 20.64%, as per our channel checks. The 9MFY24 accounts were based on a 20.64 percent return on assets formula; however, due to the allowance of a higher return of 26.22 percent (for FY24), the 4Q seems to be inflated. The Oil and Gas Regulatory Authority (OGRA) has allowed a higher return to SNGP in FY24, as in FY23, SSGC was awarded a higher return of 23.45 percent while SNGP was awarded 16.60 percent. To compensate for this disparity in FY23 returns, SNGP is allowed a higher return in FY24. SNGP also approached the high court for this disparity in FY23. Furthermore, SNGP has reported distribution UFG (indigenous) of 7.74 percent vs. the allowed benchmark of 7.21 percent, resulting in disallowance of 53bps or Rs. 2 billion. The company has also restated its accounts and made some changes in accounting entries, which is why gross profits and finance cost numbers are revised down for QoQ comparison. The company has recorded an effective tax rate of 36 percent in FY24 compared to 33 percent in FY23. Alongside the results, the company has also declared a dividend of Rs. 7.5/share for FY24 vs. Rs. 4.5 for FY23. The company is trading at FY25 and 26F PE of 4.6x and 5.2x, respectively.