Buy Gujarat Gas; target of Rs 560: Motilal Oswal

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Motilal Oswal's research report on Gujarat Gas

Gujarat Gas (GUJGA) has proved to be a clear outperformer since the curbing of polluting fuels at Morbi an impetus by the government toward the adoption of greener fuel. Since our upgrade in Dec’19, the stock is up 116% – it has outperformed the Nifty by ~95% – despite which the stock trades at 21x FY23E EPS currently. Interestingly, we have upgraded our EPS every quarter since then (from INR12.3 to INR19.9 for FY22E) on the back of better-than-expected volume growth.

Outlook

Factoring in all of the above, the stock demands an upgrade, thus closing the gap v/s IGL (same volume growth potential of 10–12% over the medium term) – we value the stock at 24x (from 22x earlier) to arrive at Target Price of INR560/share. Reiterate Buy, with the possibility of further earnings upgrades going forward.

For all recommendations report, click here

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