Hold Gujarat Gas; target of Rs 480: Emkay Global Financial

Hold

Emkay Global Financial's research report on Gujarat Gas

Gujarat Gas (GGL) reported weak earnings in Q1FY24, due to 12% lower than expected volumes at 9.2mmscmd, on slower Morbi recovery, despite price cuts undertaken to remain competitive vs propane. EBITDA/scm fell 34% QoQ to Rs4.6 — a 7% miss. EBITDA/PAT clocked an 18%/27% miss to our estimate, at Rs3.9bn and Rs2.2bn. GGL also announced a non-core investment of Rs1bn for 7.87% stake in GSPC LNG (Mundra LNG terminal). Current Morbi volumes are at ~4mmscmd, while Mgmt. expects 5mmscmd going ahead, as demand improves owing to better IPNG vs propane economics. EBITDA/scm guidance is maintained at Rs4.5-5.5.

Outlook

We have cut FY24E/25E earnings by 12%/13%, to factor-in the 2-3% lower volume and the 8-9% lower unit margin, based on Q1 rate/guidance. We retain HOLD and revise down our TP by >9% to Rs480/sh.

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Gujarat Gas - 04 -08 - 2023 - emkay