Buy Gujarat Gas; target of Rs 660: Motilal Oswal

Motilal Oswal's research report on Gujarat Gas

Gujrat Gas (GUJGA)’s 2QFY25 EBITDA was ahead of our estimates as a strong EBITDA/scm margin offset the volume weakness. Management slightly raised its margin guidance to INR5-6/scm (from INR4.5-5.5). However, the volume guidance commentary has remained cautious, guiding 6-7% growth over the next 18-24 months. We are not too concerned about the CGD companies’ necessity to undertake CNG price hikes, given its solid price competitiveness vs. petrol. Following the conference call, we cut our FY26/27 PAT by 9/10%. Recovery in ceramic exports (and therefore Morbi volumes) and potential decline in spot LNG prices remain key catalysts in FY26, in our opinion.

Outlook

The stock is trading at P/E of 26.2x FY26E and EV/EBITDA of 14.9x for FY26E. We reiterate our BUY rating on the stock with a TP of INR660, valuing it at 30x Dec’26E EPS.