Sharekhan's research report on Gujarat Gas
Q2 performance was strong with a sharp 67% beat in PAT at Rs. 298 crore, led by robust EBITDA margin performance. Magin expansion of 25% q-o-q to Rs5.8/scm was led by lower spot LNG price. Volume remained flat q-o-q at 9.3 mmscmd. Recent I-PNG price hike to sustain current margin without impact on volume as Morbi customers are willing to pay some premium given convenience of natural gas. Volume growth/EBITDA margin guidance of 10% p.a./Rs. 4.5-5.5/scm.
Outlook
The steep fall of 15% in the stock price in CY2023YTD factors in volume/margin volatility and valuation of 15x its FY2026E EPS is attractive. Hence, we maintain Buy on GGAS with a revised PT of Rs. 490.
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