Motilal Oswal's research report on Gujarat Gas
GUJGA’s total volumes at 8.9mmscmd were broadly in line with our estimate. EBITDA margin at INR7/scm beat our estimate of INR6/scm. Morbi volumes improved substantially to 3.6mmscmd in 4QFY23 (v/s 2mmscmd in 3QFY23) due to the narrowing price gap between natural gas and alternate fuels as a result of price cuts taken by GUJGA in 4QFY23. Currently propane prices are at par with natural gas, while LPG is trading at a discount of INR1.5-2/scm. The company’s long-term gas contract of ~1mmscmd with Vedanta expired during the quarter, which aided margins with increased share of cheap spot LNG in the volume mix. The spot LNG price continues to fall to USD11/mmBtu for May’23 delivery from USD15.6/mmBtu in 4QFY23, which can result in further recovery in volumes.
Outlook
We expect FCF generation of ~INR21b over FY24-25 despite capex plans of ~INR20b. We reiterate our BUY rating on the stock with a TP of INR610 (at 26x FY25E EPS).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
