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Buy Gujarat Gas; target of Rs 586: Motilal Oswal

Motilal Oswal is bullish on Gujarat Gas recommended buy rating on the stock with a target price of Rs 586 in its research report dated August 03, 2022.

August 05, 2022 / 10:08 PM IST
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Motilal Oswal's research report on Gujarat Gas


Lower-than-estimated volumes resulted in lower-than-estimated spot/short-term cargoes, thereby reducing gas cost. As a result, GUJGA reported a beat on our EBITDA estimate, with higher EBITDA/scm (at INR6.8). Volumes stood at 9.8mmscmd (Morbi: ~4.7mmscmd) in 1QFY23.  It is currently clocking volumes of ~9mmscmd. Of this, Morbi stands at 4.3mmscmd. LPG consumption at Morbi stands ~2mmscmd. Volumes are expected to decline further in Aug’22, led by plant shutdowns, amid higher inventory and weak demand. Spot LNG prices rose to USD42.2/mmBtu in Jul’22 v/s USD28/mmBtu in 1QFY23. However, GUJGA has contracted short-term cargoes for most of its requirements for the remainder of FY23, thereby shielding it against currently high spot LNG prices.



Outlook


We maintain our Buy valuing on the stock and arrive at our TP of INR586 (at 26x FY24E EPS).

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Gujarat Gas - 040822 - moti

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first published: Aug 5, 2022 10:05 pm
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