Hold Gujarat Gas; target Rs 292: Emkay
Emkay Global Financial Services has recommended hold rating on Gujarat Gas with a target price of Rs 292, in its February 25, 2013 research report.
February 25, 2013 / 15:51 IST
Emkay Global Financial Services has recommended hold rating on Gujarat Gas with a target price of Rs 292, in its February 25, 2013 research report.
"GGCL reported results which were above street and our estimates. Revenue for the quarter stood at Rs.7.6bn, growth of 17.1%YoY and decline of 9% QoQ. Sequential decline in revenue was on account of lower volume offtake from industrial retail segment. EBITDA during the quarter was at Rs.1.08bn, decline of 20.4% QoQ on account of higher cost of raw material and same has been reflected at PAT level which decline by 30% QoQ to Rs.0.7bn. Natural gas volume sold during the quarter was at 270mmscm, decline of 14% YoY and 8.5% on the back of lower offtake from industrial retail segment.During Q3CY12, GGCL had not taken any price hike, however YoY basis, increase in sales realisation was on account of price hiked across segment. During the quarter average sales realization stood at Rs.28/scm, growth of 35% YoY and flat QoQ. However, recently company has increased selling price in CNG segment (from Rs.52/kg to Rs.56.3/kg) to compensate the increase in cost of raw material.During the quarter, gross margin has decline from Rs.6.1/scm to Rs.5.7/scm on QoQ, on the back of higher coast of raw material especially RLNG which grew from $12/mmbtu to $15/mmbtu. Same has been reflected in EBIDTA/scm which also declined by 16.5% QoQ to Rs.3.9/scm.Valuation: On fundamental basis we don’t see any major event in near term which could drive company’s earnings and valuations. Moreover the way GSPC has given the valuations to acquire stake which implies that the regulatory concern still persists in the CGD business and we don’t see it to resolve soon. However we expects recovery in volumes post softening in spot LNG prices after winter season from industrial retail customers. We factor company’s volumes to expand to 3.3/3.5mmscmd in CY13/14 with marginal improvement in spread at Rs.3.8/scm from Rs.3.5/scm currently for CY13/14. Currently the stock trades at 12.1x CY14 EPS and 2.5x P/BV, maintain hold with a target price of Rs 292," says Emkay Global Financial Services research report.Promoters who have pledged maximum shares in their company Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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