Angel Broking neutral on Gujarat Gas

Angel Broking has maintained a neutral rating on Gujarat Gas (GGAS) in its February 21, 2013 research report. The research firm believes that, high price of LNG will continue to impact the volume growth of the company.

"GGAS reported a strong growth in operating profit on account of higher realizations during 4QCY2012. The company's top-line increased by 17.1% yoy to Rs 762cr on account of higher realization, partially offset by declining volumes. Average sales realization grew by 37.1% yoy to Rs 28.0/scm; however, natural gas sales volumes fell 14.0% yoy to 270mmscm. The company's cost of goods sold increased by 5.9% yoy to Rs 604cr on account of higher proportion of expensive RLNG sales. However the staff costs and other expenses declined 0.6% and 7.1% yoy to Rs 16cr and Rs 33cr respectively. Hence, the EBITDA grew by 266.6% yoy to Rs 110cr. and net profit increased by 181.9% yoy to Rs 70cr. Outlook and valuation: The company's volumes have declined gradually during the past one year on account of higher price of spot LNG and lower production from the KG D6 block. Going forward, we believe that high price of LNG will continue to impact the volume growth of the company. Further, the recent proposal to cap gas marketing margin by PNGRB remains an overhang on the stock. At current levels, the stock is trading at 12.2x and 11.3x CY2013E and CY2014E earnings, respectively. Given the regulatory overhang, we maintain our Neutral rating on the stock," says Angel Broking research report. Institutional holding more than 40% in Indian cos 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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