A declining market offers you a chance to invest in these five companies which are defying the slowdown and recording galloping sales and profits.An analysis by Debashis Basu and Pratibha Kamath

Last year’s downturn squeezed the profits of a large number of companies, mainly in the commodities, software and exports sectors. Wouldn’t it be great to identify companies that have not only expanded their businesses in the past three difficult quarters but also done so at an accelerated rate? Here are five such companies. All of them are worth buying for the long term.

GSPL: Networking Benefits
We had written about Gujarat State Petronet (GSPL) in the Moneylife issue dated 12 April 2007. Since then, the stock has risen by 62%. GSPL is a pioneer in developing energy transportation infrastructure and connecting natural gas supply basins and LNG terminals to growing markets. It is the first pipeline company operating on an open access basis and is a pure transmission network with systematic and seamless pipelines across Gujarat. It sources gas from traders, producers and LNG terminals and supplies them to user industries such as power, fertiliser, steel, chemical plants and to local distribution companies.

The Indian natural gas market is still underdeveloped but is slowly emerging as one of the largest gas markets in the world. According to Hydrocarbon Vision 2025, the share of natural gas would increase to 20% of total primary energy consumption by 2025. Gas pipeline companies, like Gas Authority of India (GAIL), Gujarat Gas and, of course, Reliance Industries, will grow as more pipelines are laid and more gas flows through them. GSPL already has a gas network of 1,400km in one of the fastest-growing areas of the country, especially since natural gas is a prime energy source in Gujarat. About 35% of India’s natural gas is consumed in Gujarat. GSPL is commissioning another 500km of pipeline over the next 18 months and will benefit from the tax concessions given to pipeline companies in the Finance Act 2009.

GSPL has consistently announced excellent financial results, thanks to higher gas output throughout and rising tariff, forcing investment analysts to revise their profit forecasts for the company. In the September quarter, revenues grew 115% and operating profit grew 139%, backed by an extremely high operating margin of 87%. GSPL’s volumes jumped due to the flow of KG-Basin gas; this will continue to increase. New and expanded sources of revenues would be: increased gas supply from the KG-Basin and LNG from Petronet’s Dahej terminal. Currently, GSPL charges around Rs915/tscm (thousand standard cubic metres) which is expected to remain stable. Assuming stable tariff and higher throughput, GSPL may clock an EPS of around Rs9 for FY10. At the current price, of around Rs82, it is valued reasonably.

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