Accumulate Gujarat Gas; target of Rs 516: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Gujarat Gas

We upgrade our rating from ‘Hold’ to ‘Accumulate’ given expectation of steady gas prices over rising propane prices, thereby helping the company grow industrial volumes. Gujarat Gas (GGAS) reported weaker than expected results with EBITDA/PAT of Rs 3.9 bn (-31% Q/Q; PLe Rs 4.5 bn)/Rs 2.2 bn (- 42% Q/Q; PLe Rs 2.6 bn) respectively, owing to lower realization led by price cuts taken by the company. Fall in APM prices from US$8.57/mmbtu to a ceiling of US$6.5/mmbtu coupled with lower VAT charges (since October 2022) and increase in import duty of propane (since July 2023) will likely help in growing gas sales, going forward.

Outlook

The company also incurred capex of Rs2-2.5 bn in Q1 and guided for further Rs 10-12 bn per annum for next three years to be funded through internal accruals. Upgrade to ‘Accumulate’ with a TP of Rs 516 (previous TP Rs 450) based on 24x P/E FY25E.

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Gujarat Gas - 04 -08 - 2023 - prabhu