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Macquarie bullish on these 2 stocks, expects double-digit returns

Macquarie increased its earnings estimates for Gujarat Gas by 13-15 percent for FY21/22 and forecast company's EBITDA/EPS to grow at a 14/10 percent CAGR over FY20-25.

November 26, 2019 / 03:14 PM IST
 
 
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Global brokerage house Macquarie has maintained bullish stance on Gujarat Gas and Mahanagar Gas with outperform call on both stocks citing attractive valuations.

The research house also raised price targets on both. In the case of Gujarat Gas, it increased target to Rs 240 (from 210 earlier), implying 25.6 percent potential upside from current levels.

The stock was quoting at Rs 203.65, up Rs 12.55, or 6.57 percent on the BSE at 1450 hours IST, while in last nine months, it surged 69 percent.

Macquarie increased its earnings estimates for Gujarat Gas by 13-15 percent for FY21/22 and forecast the company's EBITDA/EPS to grow at a 14/10 percent CAGR over FY20-25.

"We raised FY21/22 EPS estimates by 13-15 percent on better margin and steady volumes," it said.

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Gujarat Gas's volume in Q2FY20 increased by 40 percent driven by higher industrial volumes that jumped 56 percent YoY. Strong demand from the ceramic tile manufacturing cluster in Morbi lifted industrial volumes.

Its pecking order in city gas distribution companies is Gujarat Gas, followed by Mahanagar Gas and Indraprastha Gas.

As for Mahanagar Gas, Macquarie increased its earnings estimates by 7-11 percent for FY21/22 and forecast company's EBITDA/EPS to grow at a 6/5 percent CAGR over FY20-25. "Valuations are attractive at current levels," it said.

MGL volume growth in July-September period was tepid at 1.1 percent YoY as well as QoQ basis, following disruption in gas supply due to a fire incident at ONGC’s Uran plant during the quarter.

The stock was quoting at Rs 1,031.70, down Rs 4.70, or 0.45 percent on the BSE at 1452 hours IST after morning rally, but it rallied 18 percent in last nine months.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Nov 26, 2019 03:14 pm

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