Gujarat Gas Ltd. share price target

The quarter witness robust increase of 40.1% YoY in volumes to 9.3 mmscmd. Industrial volumes were at 7.2 mmscmd vs. 4.6 mmscmd YoY and 7.1 mmscmd QoQ due to volume impact from the Morbi industrial area. Morbi industrial volumes were at ~5 mmscmd for the quarter i.e. 70% of industrial volumes. CNG volumes at 1.5 mmscmd showed stable growth, while domestic/commercial PNG volumes came at ~0.7 mmscmd. Gujarat Gas continued to benefit from latest National Green Tribunal (NGT) order as industrial sales volume remained robust. Going forward, the company plans...

Gujarat Gas (GUJGA) reported Q2 FY20 earnings below estimates at Rs 2.2bn (Adjusted for Rs 2.9 bn tax write-back; +5.3x YoY).

the NGT ban at Morbi volumes from 1QFY20. PBT stood at INR6.2b (v/s INR2.5b in 1HFY20), while PAT came in at INR7.5b (v/s INR1.6b in 1HFY20). EBITDA/scm was in line with our estimate at INR4.3 (v/s INR2.6 in 2QFY19). EBITDA/scm normalized (from highest ever in 1QFY20 at INR5.6), as the company took a PNG I/C price cut of INR2.5/scm during the start of the quarter. Spot LNG prices averaged USD5.1/mmbtu in 2QFY20 (v/s USD10.4 in 2QFY19 and USD5.4 in 1QFY20). Total volumes stood at 9.3mmscmd (40% YoY)....

To accommodate the stellar Q1FY20 performance, we raise EPS estimates for FY20/21E from Rs 8.8/11.1 to Rs 11.1/11.7. We expect (1) Low LNG prices to boost industrial volumes; (2) The development of CGD ecosystem across Gujarat to push CNG volumes. We remain positive on the company as it generates OCF yield of almost 9.5% and RoE of >25% over FY21/22E. Valuations are contextually unreasonable at 15.4/14.6x FY21/22E EPS. Post the outstanding Q1FY20 performance, we maintain BUY on GGL. Our target is Rs 246/sh (20x Jun-21E EPS).

The quarter witnessed a robust increase of 42.2% YoY in volumes to 9.2 mmscmd. Industrial volumes were at 7.1 mmscmd vs. 5.1 mmscmd YoY and 4.3 mmscmd QoQ due to volume impact from the Morbi industrial area. Morbi industrial volumes were at ~5 mmscmd for the quarter (2-2.5 mmscmd volumes last year) i.e. 70% of industrial volumes. CNG volumes at 1.5 mmscmd showed stable growth while domestic/commercial PNG volumes were at ~0.6 mmscmd. The volume outlook remains robust as National Green Tribunal (NGT) has ordered a ban on coal based gasifiers,...

Gujarat Gas volumes were higher than expected at 833 mmscm as against our estimates of 792 mmscm. Strong revenues at ` 26.1 bn was driven by 43%YoY gas volumes growth. Gross spreads were flat on a sequential basis and higher by 9% on a yearly basis. EBITDA spreads were highest in this quarter at ` 5.6/scm due to lower LNG spot prices. EBITDA spreads increased by 32% YoY and 29% QoQ. With recent strategy of management to focus on volumes, we believe that operating spreads should sustain at ` 4.5/SCM. Overall volumes increased by 43% YoY and 41% QoQ, with...

GUJGA reported strong EBIDTA of INR4.7b (+50% beat; +88% YoY, +84% QoQ), driven by lower sourcing cost. PAT was up 93% YoY at INR2.3b. Total sales volumes were 4% higher than our estimate at 9.2mmscmd (+42% YoY/QoQ), primarily led by higher industrial volumes. EBITDA/scm for the quarter stood at INR5.6 (v/s INR4.2 in 1QFY19 and INR4.3 in 4QFY19). This is the highest-ever EBITDA/scm reported by the company, aided by lower spot LNG prices (average USD5.4/mmbtu in 1QFY20 v/s USD8.9 in 1QFY19 and USD7.4 in 4QFY19)....

Gujarat Gas (GUJGA) reported Q1FY20 earnings well above estimates at Rs 2.3bn (+93% YoY, +2x QoQ), backed by strong volumes of 9.15mmscmd (+42% YoY) and expanded EBITDA margins of Rs 5.6/scm (+32% YoY, +29% QoQ).

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.

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...