Buy Gujarat Gas; target of Rs 360: ICICI Direct
ICICI Direct is bullish on Gujarat Gas recommended buy rating on the stock with a target price of Rs 360 in its research report dated November 07, 2020.
November 09, 2020 / 11:53 AM IST
ICICI Direct's research report on Gujarat Gas
Gujarat Gas’ Q2FY21 results were better than our estimates on all fronts. Revenues were flat YoY at Rs 2513 crore (our estimate: Rs 2231.6 crore) due to growth of 5.5% YoY in sales volume during the quarter. Sales volume at 9.8 mmscmd was above estimate of 9.1 mmscmd. Realisation was at Rs 27.7/scm (our estimate: Rs 26.7/scm). Higher-than-expected realisation coupled with lower gas costs led to increase in gross margins, which improved by Rs 3.7/scm YoY and Rs 0.8/scm QoQ to Rs 10.2/scm (our estimate: Rs 7.6/scm). EBITDA was at Rs 733 crore, up 97.8% YoY (our estimate: Rs 427.7 crore). Subsequently, PAT declined 8.2% YoY to Rs 474.8 crore (our estimate: Rs 234.9 crore) as the company had negative tax outgo in the base quarter.
Sales volumes have seen sharp growth post lockdown and are currently at 10.5 mmscmd. We expect growth momentum in industrial PNG segment to continue and build in volume growth in CNG segment from Q4FY21E onwards. In the long term, rise 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 maintain BUY on Gujarat Gas with a revised TP of Rs 360 (19x FY22E EPS).
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