ICICI Direct is bullish on Gujarat Gas has recommended buy rating on the stock with a target price of Rs 350 in its research report dated August 05, 2020.
ICICI Direct's research report on Gujarat Gas
Gujarat Gas’ results for Q1FY21 were largely in line with estimates on the profitability front. Revenues declined 58.6% YoY to Rs 1082.9 crore (our estimate: Rs 1079.8 crore) due to a sharp fall of 54.7% YoY in sales volume during lockdown. Sales volume at 4.1 mmscmd was below estimate of 4.6 mmscmd. Realisation were at Rs 28.7/scm (our estimate: Rs 25.8/scm). Gross margins improved Rs 1.4/scm YoY and Rs 2.3/scm QoQ and were at Rs 9.4/scm (our estimate of Rs 7.4/scm). Gross margin increase was on account of better-than-expected realisation and low gas costs. EBITDA was at Rs 185.7 crore, down 60.2% YoY (our estimate: Rs 184.1 crore). Subsequently, PAT declined 74.9% YoY and was at Rs 58.7 crore (our estimate - Rs 62.11 crore).
Sales volumes have recovered from April lows and are currently at 9.5 mmscmd with a full recovery in industrial segment. We expect Gujarat Gas to report volume growth from Q2FY21E onwards itself. Over the long term, increase in volumes driven by regulatory tailwinds, further penetration in existing geographical areas (GAs) and aggressive expansion in newly acquired Gas will lead to sustainable growth. We revise the rating for Gujarat Gas from HOLD to BUY with a target price of Rs 350 (19x FY22E EPS).
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