Gujarat Gas Ltd. share price target

We had highlighted in our previous report how cheaper propane and LPG were emerging as the alternatives at Morbi. Sale of propane stands slightly lower at 0.07mmscmd due to an increase in prices. However, our channel checks suggest that there are 15 new propane installations coming up at Morbi by March 2018, and 28 more are in various stages of construction. Increased flexibility would result in higher volatility for GUJGA. Coal prices are at INR8/kg, ~15% cheaper than gas....

Volume growth to remain stable in coming quarters Volumes during the quarter increased 19.1% YoY to 6.1 mmscmd but came in slightly below our estimates of 6.3 mmscmd mainly on account of lower than estimated industrial and domestic PNG volumes. The quarter witnessed an uptick in price sensitive segments like Morbi ceramic segment due to lower spot LNG prices. This led to an improvement in YoY growth in Q1FY18 volumes. We expect GGL's volume growth momentum to continue in future mainly due to higher...

PNG Domestic: In domestic sector , PNG is primarily used as cooking fuel and for water heating being a safer alternative than LPG cylinders. PNG Industrial: Natural gas is mainly used in industrial applications like heating, cooling, power, processes and manufacturing. The company is supplying PNG...

ICICI Securities Ltd | Retail Equity Research Gujarat Gas announced its Q4FY17 results, which came in below our estimates on the profitability front. Revenues increased 1.6% YoY below our estimates at | 1400.2 crore (our estimate: | 1441.6 crore) on account of marginally lower-than-expected volumes Volumes increased 11% YoY to 6.1 mmscmd, marginally lower than our estimate of 6.3 mmscmd. EBITDA declined 34% YoY to | 146.3 crore, below our estimate of | 204.6 crore mainly on account of...

Results came below our and consensus' estimates at the operating level. This is largely attributable to a sharp increase in RM cost (contracted and SPOT LNG prices) in Q4FY17. Thus, EBITDA came in at Rs1.4bn (-14.4% qoq) versus our estimate of Rs1.8bn while PAT came in at Rs331mn (-21.6% qoq) against our expectation of Rs490mn. Gross margin came in at Rs5.3/scm i.e. a decline of 55bps qoq while EBITDA/scm declined by 59bps qoq to Rs2.7/scm. However, volume grew by 14% qoq to 6.06mmscmd which we believe is the silver lining in the results. Due to plant shut down in the LNG terminal, company replaced RasGas volume with...

Gujarat Gas announced its Q3FY17 results, which came in line with our estimates on the topline front. The revenues declined 17.1% YoY to | 1230.9 crore (our estimate: | 1230.8 crore) The volumes declined 1.9% YoY to 5.3 mmscmd, largely in line with our estimate of 5.1 mmscmd. The gross margins increased by 10.9% YoY to | 5.8/scm, however, came below our expectation of | 6.6/scm. EBITDA increased 8.9% YoY to | 170.9 crore, and came below our estimates of | 207.6 crore...

Gujarat Gas announced its Q2FY17 results, which came in lower than our estimates. The topline increased marginally QoQ to | 1237.1 crore in Q2FY17 but came in lower than our estimate of | 1308.7 crore, mainly due to lower than estimated sales volumes Gross margins declined marginally by 2.1% QoQ to | 6.9/scm against our expectation of | 7/scm. Volumes increased marginally QoQ to 5.2 mmscm but below our estimate of 5.4 mmscmd. Subsequently, EBITDA came in at | 212.8 crore, below our estimate of | 248.6 crore...

Gujarat Gas Ltd. (GGL), with the largest addressable area in one of 28,179 the leading industrialized states, offers a compelling investment 8,709 opportunity in the City Gas Distribution (CGD) business. We expect...

Top takeaways from Q1FY17 : Gas sales volume fell 5% qoq to 5.14mmscmd (6% below our estimate of 5.50mmscmd) due to seasonal dip in domestic PNG volumes. Gross margin rose 3% qoq to Rs 7.0/scm (in line) due to decline in raw material gas price while clean EBITDA/scm increased 9% qoq to Rs 4.5 on 8% fall in opex/scm to Rs 2.5 9 Interest declined 11% qoq to Rs 534mn; ETR normalised at 30.1%; Net debt of Rs 22.8bn 8 PAT was up 30% yoy and 10% qoq at Rs 759mn, but 16% below our tax adjusted estimate due to lower than expected volumes. OCI was Rs 40mn loss in Q1FY17.

Outlook and valuation: They maintain positive view on GGL due to expected traction in existing markets like Morbi from 2HFY17 onwards. Longer term outlook is attractive with economic/industrial revival and development in new areas. We cut our FY17 EPS by 6% but raise our longer term estimates.Also lower WACC in DCF and hence revise their target price to Rs 700 (Rs 600 earlier). Maintain Buy 

Gujarat Gas announced its Q1FY17 result, which came in lower than our estimates. Revenues declined 11.1% QoQ to | 1224.8 crore in Q1FY17 (our estimate: |1306.6 crore) mainly due to lower gas costs • Gross margins increased 2.6% QoQ to | 7/scm vs. our expectation of | 6.7/scm. However, volumes declined 5.1% QoQ to 5.1 mmscmd mainly due to lower domestic PNG volumes and came in below our estimate of 5.4 mmscmd. Subsequently, EBITDA came in at | 219 crore, below our estimate of | 232.4 crore • PAT increased 30.7% QoQ during the quarter to | 75.9 crore but came in below our estimate of | 84.9 crore.

Outlook & Valuation : Gujarat Gas has been rapidly expanding its reach in Gujarat by way of securing licences to expand its CGD network across five new areas, making it to a total of 19 districts of Gujarat, Dadra and Nagar Haveli, Thane and Palghar in Maharashtra. With its expanding presence across several districts in Gujarat and falling LNG and APM gas prices, Gujarat Gas stands to benefit in future from volume growth and margins expansion. We believe the company’s strong CGD network offers good demand potential due to lower CNG and residential PNG penetration and increased usage of natural gas for industrial volumes. However, we believe the stock is fairly valued at current market price and recommend HOLD on the stock. We value Gujarat gas based on the DCF methodology to arrive at a target price of | 615 (WACC – 12%, terminal growth – 3%)