Motilal Oswal's research report on Gujarat Gas
GUJGA reported a beat on our EBITDA estimate, with higher EBITDA/scm (at INR7.8) due to lower than anticipated gas cost. Volumes stood at 9.9mmscmd in 4QFY22. It is currently clocking in volumes of over 10.5mmscmd. Morbi volumes stood at 5.3mmscmd in 4QFY22 and is currently at 5.5mmscmd. These volumes are soon expected to cross 6mmscmd, with the shift of ~1mmscmd of users currently on LPG. Non-Morbi volumes stood at 1.5mmscmd (down 36% YoY). Spot LNG prices fell to USD24.5/mmBtu in Apr’22 v/s USD29.4/mmBtu in 3QFY22 and USD35.4/mmBtu in Mar’22. Cooling of these prices will result in a further volume recovery, with an improvement in EBITDA/scm from FY22 levels. We estimate an EBITDA/scm of INR5.5 each in FY23/FY24 v/s INR5.3 in FY22. The company’s volume growth prospects remain robust with the addition of new industrial units, existing units undergoing expansions, and the emergence of a new ceramic cluster at Aniyari (potential of ~0.5mmscmd). The Supreme Court order in its favor for Ahmedabad rural presents prospects of 0.8-1.2mmscmd over the next two-to-three years.
We maintain our Buy valuing on the stock to arrive at our TP of INR650 (at 26x FY24E EPS). Any underperformance in terms of EBITDA/scm or volume growth v/s our projection can pose a key risk for GUJGA.
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