Angel Broking neutral on Gujarat Gas

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Angel Broking neutral on Gujarat Gas

Angel Broking has maintained neutral rating on Gujarat Gas (GGAS) in its November 3, 2011 research report.

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Angel Broking has maintained neutral rating on Gujarat Gas (GGAS) in its November 3, 2011 research report.

"Gujarat Gas (GGAS) reported a good performance on the revenue, EBITDA and PAT front for 3QCY2011. Growth during the quarter was led by higher realization. For 3QCY2011, GGAS reported top-line growth of 28.7% yoy to Rs 653cr mainly on account of higher realization. Average sales realization stood at Rs 19.7/scm (up 24.7% yoy), driven by hike in selling prices of the industrial retail and CNG segments. Other income boosts net profit growth: Cost of goods sold during the quarter increased by 28.8% yoy to Rs 490cr on account of higher proportion of expensive RLNG sales coupled with INR depreciation against the USD. Hence, the company's EBITDA grew by 30.4% yoy (in-line with net sales growth) to Rs 118cr. Other income during the quarter grew by 100.9% yoy to Rs 10cr. Consequently, the company's net profit grew by 41.5% yoy to Rs 80cr."

"GGAS still awaits authorization from PNGRB for its areas of operations. However, to pursue growth, the company has bid for a new area within Gujarat under the third round of bidding conducted by PNGRB. Besides volume growth, to maintain margins, the company plans to price its gas as per the pricing of alternative fuels. At current levels, the stock is trading at 17.8x and 15.9x CY2011E and CY2012E earnings, respectively. We believe the stock is fairly valued at current levels and, hence, maintain our Neutral stance on the stock," says Angel Broking research report.

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To read the full report click on the attachment