Gujarat Gas Ltd. share price target

Benign spot LNG outlook augurs well for GGAS earnings. We increase our FY21E earnings by 24% to factor in sharp volume recovery and margin expansion given benign spot LNG prices. FY22-23E earnings are increased by 8-10% as we increase margins and volumes. GGAS reported strong Q2 earnings led by higher than expected volumes and record spreads...

Gujarat Gas' (GUJGA) Q2FY21 earnings were above estimates, surging 8x QoQ to Rs 4.8bn.

We recommend a BUY on Gujarat Gas with a Target Price of Rs.312, an upside of ~7% from CMP of Rs. 291 and Stop Loss of Rs.278.

Volumes were at 906 mmscm which was an increase of 5.4%YoY and of 140% QoQ, with industrial segment growth at 9% YoY and 178% QoQ. Sales from the industrial segment is currently above Pre Covid levels as their sales volume has shown robust recovery post lockdown. Realisations declined sequentially by 3.4% to Rs 28.3/scm as price reduction were taken in industrial segment to compete with alternate...

Historically the Natural Gas usage in India has seen a slowdown with power sector shifting back to coal from Natural Gas due to lower availability of cheap domestic gas and increased dependency on costly R-LNG. However, with R-LNG prices expected to be low, some of the power producers may shift back to Natural Gas. Growth of India's share in the global energy market is expected to increase in the coming years. India has been mainly dependent on high polluting fuels viz. coal, Furnace Oil to meet its ever growing energy needs. GOI; realizing the importance of protecting the...

8 September 2020 Oil & Gas Prior to the National Green Tribunals (NGT) mandate to ban coal gasifiers at Morbi, GUJGAs margins and volumes were highly volatile. This was primarily driven by competition from coal gasifiers. However, post the NGTs ban, the companys volumes and margins (excluding one off in 1QFY21) stabilized. The low LPG prices have enabled few consumers to install LPG equipment at their premises. The total installed capacity currently stands at ~0.6mmscmd for LPG. usage during the monsoons increases to ~0.6mmscmd, while it stands at ~0.3mmscmd for the rest of the year (forming merely ~3-4% of total volumes). Gujarat Gas Since the implementation of the blanket ban on coal gasifiers at Morbi, total industrial sales have increased. Combined with that, BG volumes have also come down slightly from 2.5mmscmd to 2.2mmscmd (the company currently has 3.2mmscmd of long-term contracts).

4 August 2020 EBITDA/scm was better than est. INR4.1) and higher QoQ as well (INR4.7 in 4QFY20). Reported EBITDA was at INR1.85b (-60% YoY; -56% QoQ), with PBT at INR0.8b. PAT came in at INR0.6b (-75% YoY and QoQ). CNG volumes stood at 0.7mmscmd (-54% YoY and QoQ). PNG I/C stood at 2.9mmscmd (-60% YoY; -63% QoQ).

Currently, sales volume are at 5.5 mmscmd, down ~45% from pre-Covid level. In H1FY21E, we expect report volume de-growth with growth set to be seen from Q3FY21E onwards. In the long term, increase in volumes driven by regulatory tailwinds, further penetration in existing geographical areas (GAs) and aggressive expansion in newly acquired gas will lead to sustainable growth. Due to recent run up in stock price, we revise our rating...

SBIN: Core operating profitability remains weak cut to ADD. DIVI: Q4 disappoints downgrade to REDUCE. May MPC Minutes: Room for another 25bps rate cut. GUJGA: Robust margin outlook. IOCL: Covid-19 update operations fast returning to normal