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Buy Gujarat Gas: Target Of Rs 400: Sharekhan

Sharekhan is bullish on Gujarat Gas recommended buy rating on the stock with a target price of Rs 400 in its research report dated November 06, 2020.

Nov 11, 2020 / 11:29 AM IST
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Sharekhan's research repor on Gujarat Gas

Q2FY21 operating profit/PAT at Rs. 733 crore/Rs. 475 crore, up 97.8%/2.4x y-o-y was much ahead of our estimates due to 72% and 4.6% beat in EBITDA margin at Rs. 8.1/scm (up 87.5% y-o-y) and volume at 9.8 mmscmd (up 5.5% y-o-y) respectively. Industrial PNG volumes increased by 9% y-o-y to 7.9 mmscmd due to improved demand from Morbi, CNG volumes recovered sharply to 1.3 mmscmd (up 88% q-o-q but down 13.2% y-o-y) while domestic PNG volumes grew 18% y-o-y to 0.6 mmscmd. GGAS is best-placed in the oil & gas space to benefit from India’s robust gas demand outlook supported by regulatory push to curb pollution. Current volume run rate of 10.5mmscmd is 11.2% higher than FY2020 gas sales volumes. Consistent high volume growth to drive 19% PAT CAGR over FY20-FY23E along with RoE of 25-27% and GGAS to become net cash positive by FY22.


Hence, we recommend Buy on GGAS with PT of Rs400. Valuation attractive at 14x FY23E EPS.

For all recommendations report, click here

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first published: Nov 11, 2020 11:29 am

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