ICICI Direct is bullish on Gujarat Gas has recommended buy rating on the stock with a target price of Rs 750 in its research report dated November 06, 2018.
ICICI Direct's research report on Gujarat Gas
Gujarat Gas reported a disappointing set of numbers in Q2FY19. Revenues increased 41.2% YoY to Rs 1964.3 crore and came in above our estimates. Total reported volumes increased 16.5% YoY and came in at 6.7 mmscmd vs. our estimate of 6.5 mmscmd on account of higher sales volumes on the industrial PNG front Realisations were higher than our estimate at Rs 32/scm (our estimate: Rs 31.6/scm). However, sharp increase in gas costs due to increase in LNG prices and rupee depreciation led to decline in gross margins, which was at Rs 5.3/scm (our estimate of Rs 6.7/scm) leading to an EBITDA of Rs 160.7 crore, below our estimate of Rs 230.2 crore Subsequently, profitability declined 32.8% YoY to Rs 41.1 crore and came in below our estimate of Rs 83.5 crore.
However, due to current high LNG prices and relatively lower growth in profits, we now value Gujarat Gas at 22x FY20E EPS of Rs 34.1 to arrive at a target price of Rs 750 with a BUY recommendation.
For all recommendations report, click here
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