Buy Gujarat Gas; target of Rs 560: ICICI Securities

ICICI Securities's research report on Gujarat Gas

Gujarat Gas (GUJGA) reported 26/28% YoY decline in EBITDA/PAT to INR 3.8bn/INR 2.2bn (I-Sec est. of INR 4.1/INR 2.3bn) in Q3FY25. Volume of 9.5mmscmd vs our estimate of 9.4mmscmd was offset by lower margin (EBITDA margin of INR 4,4/scm vs estimated INR 4.8/scm). Morbi volume estimated at ~3.35mmscmd was up 0.5mmscmd QoQ due to relatively better pricing vs propane in Q3, even as YoY trends remain subdued due to continued export softness owing to shipping disruptions/weak demand globally. With reinstatement of part of APM gas, price hike of INR 3/kg taken and the structural transformation ahead due to merger of GSPC/GSPL (group earnings CAGR post-merger expected at -1.6% over FY25-27E) – we are applying 19x PER to FY27E rough-cut consol estimate to deliver a revised TP of INR 560 (vs INR 600 previously). Reiterate BUY.

Outlook

Our standalone earnings have been lowered by 11.3%/13.8% for FY26/27E to factor in lower volumes from Morbi, but even on cuts, a revised target multiple of 19x FY27E EPS (group earnings post the GSPC merger) delivers a TP of INR 560– a 19% upside. Reiterate BUY.