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