Sharekhan's research report on Gujarat Gas
Q1FY23 PAT of Rs. 381 crore declined by 16% q-o-q but was 10% above our estimate led by beat in EBITDA margin and gas sales volumes. Lower-than-expected decline of 13% in EBITDA margin at Rs. 6.8/scm reflects better blended realisation, which led to a beat in gross margins at Rs. 9.8/scm. Volumes were largely steady q-o-q with 1%/12% q-o-q rise in industrial PNG/CNG volumes but D-PNG volumes declined sharply by 31% q-o-q. Price gap between GGAS’s I-PNG and propane would mean near headwinds for volume (range of 1.5-2 mmscmd) while margin to sustain at over Rs. 6/scm as it has tied-up most of its FY23 spot LNG at $25-26/mmscmd. We have cut our FY23E/FY24E EPS by 13%/12% to factor in lower volumes. GGAS’s valuation of 21x/17x FY23E/FY24E EPS partly factors in volume concern and expect earnings to recovery sharply once spot LNG price normalized.
We maintain a Buy on GGAS with but with a lower PT of Rs. 545 (reflects cut in PE multiple and earnings).
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