Hold Gujarat Gas; target of Rs 415: Prabhudas Lilladher

Prabhudas Lilladher's research report on Gujarat Gas

Gujarat Gas (GUJGA) total volumes were in line with our estimates, flat YoY and 2.4% lower QoQ, at 8.7mmscmd in Q2FY26 (Ple: 8.5mmscmd). Increase in gas costs and other expenses led to a decline in EBITDA/scm to Rs5.6 in Q2FY26 vs Rs6.4/scm in Q2FY25 and Q1FY26 each, missing our estimate of Rs6.0/scm. EBITDA stood at Rs4.5bn (-13.0% YoY, -14.0% QoQ, Ple Rs4.7bn, BBGe Rs4.9bn), while PAT was Rs2.8bn (Ple Rs2.6bn, BBGe Rs2.9bn, -8.4% YoY, -14.0% QoQ). Management expects Morbi volumes to be lower in FY26 as customers shift to propane due to price differentials. Due to this, we have built in volumes of 8.9mmscmd for FY26E, in line with mgmt. guidance of sub 9mmscmd. For FY27E/FY28E, we build in volumes of 9.6/10.2mmscmd, driven by an expected improvement in non-Morbi volumes.

Outlook

The company expects EBITDA/scm at Rs5.5/scm in FY26; we have therefore lowered our FY26E assumption from Rs5.8/scm in line with the guidance. As a result, we maintain the rating at ‘Hold’ with a TP of Rs415 (earlier Rs442) based on 24x FY27/FY28E EPS.