Motilal Oswal is bullish on Gujarat Gas recommended buy rating on the stock with a target price of Rs 360 in its research report dated August 04, 2020.
Motilal Oswal 's research report on Gujarat Gas
GUJGA reported better-than-expected margin of INR4.9/scm (higher QoQ as well), while volumes were in line with est. (at 4.1mmscmd), leading to EBITDA of INR1.85b. The company mentioned that current sales volume stands at 9.5mmscmd (v/s 9.4mmscmd of average sales in FY20), aided by strong recovery post lockdown. As per our interaction with the company, Morbi volumes are back at ~5.5mmscmd (v/s exit rate of ~6.5-6.8mmscmd in FY20). Despite lockdown, GUJGA was able to add 13 new CNG stations during the quarter and plans to add ~60 new CNG stations this year (of the total 100 planned outlets - which should further grow the reach of CNG in Gujarat and encourage conversions).
However, continued outperformance in volumes and margins could lead to upward revision in estimates, along with the re-rating of the stock. GUJGA is trading at 18.8x FY22 EPS of INR16.4 and 10.8x FY21 EV/EBITDA. We value the company at 22x FY22E EPS to arrive at target price of INR360.
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