Moneycontrol Bureau
Shares of Gujarat Gas Company (GGCL) rallied 15 percent intraday Wednesday on getting approval from Petroleum and Natural Gas Regulatory Board (PNGRB) to expand distribution network for Thane.
Gujarat Gas said pursuant to the letter dated April 01 from PNGRB, received by GGCL on April 10 granting GGCL an authorisation to lay, build, operate, or expand city or local natural gas distribution network (CGD network) for the geographical area of Thane, GGCL has accepted the authorisation in schedule D of the PNGRB vide a confirmation letter to PNGRB, on April 13.
As per the provisions of the PNGRB (exclusivity for city or local natural gas distribution networks) Regulation, 2008, GGCL has been granted 300 months of infrastructure exclusivity i.e. valid up to April 01, 2040 and 60 months of marketing exclusivity valid up to April 01, 2020 for the CGD network.
Further, the authorised area for laying, building, operating or expanding the proposed CGD network will cover a geographical area of 8,683 square kilometer, said the company in its filing to the exchange.
Deutsche Bank initiated coverage on the stock with a buy rating and a target price of Rs 1030, implying 50 percent upside from current level.
According to the report, following the merger with GSPC Gas, Gujarat Gas (GGAS) will be the largest city gas distribution (CGD) company in India with natural gas sales of 7mmscmd, 1.8x those of Indraprastha Gas. The merger increases its volumes 2.5x with just 7 percent equity dilution.
The brokerage said its buy rating was premised on a 20 percent EPS CAGR over FY15-18E, 27 percent RoE and FCF yield of 8 percent on FY17E; high entry barriers ensuring annuity cashflow primarily from industrial consumers; a 12 percent volume CAGR over FY15-18E (against an 8 percent CAGR decline in FY10-14); and further growth opportunities from new geographical areas.
At 10:16 hours IST, the scrip of Gujarat Gas Company was quoting at Rs 758.90, up Rs 91.85, or 13.77 percent on the BSE.
Posted by Sunil Shankar Matkar
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