Buy Gujarat Gas; target of Rs 850: Motilal Oswal

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Motilal Oswal's research report on Gujarat Gas

Spot LNG prices surged to as high as USD35/mmBtu for Jan'22 delivery. To combat this impact, GUJGA took price hikes of INR9.5/scm in PNG-industrial and INR16/scm in PNG-commercial. Since domestic gas prices rose to USD2.9/mmBtu (GCV) from USD1.8/mmBtu, the company also took a hike of INR2.5/kg in CNG. Contrary to earlier instances, the pricing strategy surely confirms the management's resolve to protect EBITDA/scm at INR4.5-5.5/scm. We reiterate Buy on GUJGA with Target Price of INR850/share.

Outlook

GUJGA trades at 22x FY23 EPS. On strong volume prospects, we value the company at 28x Sep’23 EPS; we re-iterate Buy, with TP of INR850.

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