Gujarat Gas Ltd. share price target

We value GGL at 20x FY21EPS (vs. 25x for IGL and 19x for MGL). Our TP is Rs 222. Initiate with BUY. Gujarat Gas (GGL) volumes grew at 5% CAGR over FY18-19, while unit gross margins expanded 57bps despite a 26% jump in LNG prices. Since over two thirds of sales vols (industrial/commercial) do not qualify for domestic procurement, GGL buys via LT contracts. It also bore the brunt of ~9% INR depreciation, even as EBITDA growth was in line with volumes. The stock is flat vs. 16% appreciation of the BSE Sensex. We think this presents an opportunity, in view of volume growth visibility. The company is well positioned given (1) Low LNG prices will boost industrial gas sales volume, (2) The development of CGD ecosystem across Gujarat will push CNG volumes.

Gujarat Gas volume of 585 MMSCM was below our estimate of 650 MMSCM. The ` 19.1 bn in revenue was below our estimate, due to a volume miss. The gross spreads fell 6% QoQ and grew 23% YoY. In the past, the company's spread grew to a high level, and reverted to lower levels in the following quarter, and that happened this quarter, as well. We will...

NGT order to boost industrial sales volumes The quarter saw a decline in volume growth of 3.8% YoY to 6.5 mmscmd. Industrial volumes were at 4.3 mmscmd vs. 4.7 mmscmd YoY due to volume impact from the Morbi industrial area. CNG volumes at 1.5 mmscmd showed stable growth while domestic/commercial PNG volumes came in at ~0.8 mmscmd. However, the volume outlook remains robust as National Green Tribunal (NGT) has ordered a ban on coal based gasifiers, which would increase sales volumes from the Morbi ceramic industry. Following the NGT...

6 May 2019 EBIDTA increased 14% YoY (-21% QoQ) to INR2.5b (in-line) in 4QFY19. PAT due to a lower tax rate of 22.7% owing to write-back of excess tax provision and accrued income tax refund during the year. Total sales volumes declined 5% YoY (-2% QoQ) to 6.4mmscmd (in-line). industrial/commercial (PNG I/C) volumes stood at 4.3mmscmd (-7% YoY, -5% QoQ), while PNG household volumes were at 0.6mmscmd (-13% YoY, +15% QoQ). We have modeled PNG sales volumes of 6.6/7.3mmscmd for FY20/21, in line with the expected demand boost at Morbi. volumes stood at 1.5mmscmd (+8% YoY, +3% QoQ). We have modeled CNG volumes at 1.

In early 2019, sales volumes were down to ~2.1-2.2mmscmd, but the closure of coal gasifiers has boosted current sales volumes to ~3mmscmd at Morbi. Although ceramic manufacturers have shifted, they have not come forward to sign term contracts

Refer to important disclosures at the end of this report NGT order on closure of coal gasifiers likely to accelerate switch to PNG Click here to: Polling for Institutional Investor's 2019 Asia Research Team The National Green Tribunal (NGT) has ordered an immediate closure of coal gasifiers at Morbi ceramic cluster or switch to natural gas to continue operations, according to media reports. This comes in response to a petition filed for causing environmental damage, which was affirmed by the NEERI (plant modifications and zero discharge recommendations not...

7 March 2019 Oil & Gas The Delhi bench of the National Green Tribunal (NGT) has ordered the closure/dismantling of all coal gasifiers at Morbi in Gujarat, which is a major sales area for Gujarat Gas (GUJGA). But, according to our estimates, currently there are ~400-450 units running on coal gasifiers. Nonetheless, a blanket ban on all coal gasifiers would result in ~80-100 units going out of business completely as they would not be profitable. Peak potential is estimated at 5-6mmscmd out of which current sales stands at ~2.5mmscmd. In Jul12, the Central Pollution Control Board (CPCB) had announced a similar blanket ban on coal gasifiers, ordering the Gujarat Pollution Control Board (GPCB) to stop and dismantle all units. Back then, ceramic manufacturers had shifted to natural gas by Apr14. We have not changed our estimates as of now, but we note that an effective blanket ban could result in an immediate increase of 2.5mmscmd in volume (~38% of FY19E).

Gujarat Gas Limited, formerly GSPC Distribution Networks Limited, is engaged in the natural gas business in Gujarat. The Company is engaged in City Gas Distribution, including sale, purchase, supply, distribution, transport, trading in natural gas, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (LPG) and other gaseous form through pipelines, trucks/trains or such other suitable mode for transportation/distribution of natural gas, CNG, LNG, LPG and other gaseous form. The Company supplies Piped Natural Gas (PNG) for Domestic Usage to over 1,080,000 households in total in the state of Gujarat. The Company operates the HAPi pipeline, which is a 73.2 kilometers long and 18-inch diameter natural gas pipeline. The...

ICICI Securities Ltd | Retail Equity Research Gujarat Gas reported a good set of numbers on the profitability front in Q3FY19. Revenues increased 34.8% YoY to | 2117.4 crore. Total reported volumes increased 4.1% YoY and came in at 6.6 mmscmd vs. our estimate of 6.9 mmscmd. Volumes were below our estimates on account of lower sales volumes QoQ on the industrial PNG front Realisation were higher than our estimates at | 35.1/scm (our estimate: | 34.4/scm). Also, a lower-than-expected increase in gas...

8 February 2019 GUJGA reported significantly higher EBIDTA of INR3.2b (v/s INR2b a year ago, more than double QoQ) as against our estimate of INR1.8b. PAT came in at INR1.4b (v/s our estimate of INR576m; doubled YoY), primarily due to lower raw material cost. EBITDA/scm increased to INR5.3 (v/s our estimate of INR2.9, INR2.6 in 2QFY19), however, the street has reservations about sustainability of EBIDTA/scm above INR5. We model EBITDA/scm of INR3.9/4.0 for FY20/21. PNG industrial/commercial volumes stood at 4.6mmscmd (+2% YoY, -3% QoQ), while PNG household volumes were at 0.5mmscmd (+4% YoY, +2% QoQ).