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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