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Buy Gujarat Gas; target of Rs 650: YES Securities

YES Securities is bullish on Gujarat Gas has recommended buy rating on the stock with a target price of Rs 650 in its research report date May 11, 2022.

May 12, 2022 / 09:15 PM IST
 
 
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YES Securities' research report on Gujarat Gas


The 4QFY22 reported Ebitda at Rs 6.97bn (+26% YoY; 194% QoQ), stood in-line with our estimates. The sharp sequential improvement in operating profits was driven by a) optimization and tempering of gas sales to limit dependence on expensive LNG and b) price revision undertaken in CNG and PNG-Domestic. During the quarter on one hand LNG prices continued to be high and averaged ~USD 31/mmbtu (3Q: USD 35/mmbtu) and on the other hand APM availability remained restricted, as a result GUJGA moderated sales leading to a 13% QoQ and 18% YoY drop in sales to 9.9mmscmd, in order to protect margins . As a result Ebitda/unit expanded to Rs 7.8/scm (3Q: Rs 2.27/scm), leading to stronger profitability.



Outlook


However moving into 1QFY23, the demand environment remains robust, with appetite for expensive gas among consumers, as result GUJGA has normalized gas sales to 10.5-11mmscmd, and has also revised the prices for Industrial consumer (by ~Rs 5/unit) , CNG (Rs 2.5/unit) and PNG-D (Rs 4/unit), to keep margins steady. We upgrade GUJGA to BUY with a TP of Rs 650/sh.

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first published: May 12, 2022 09:15 pm
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