Dolat Capital Market has given Buy recommendation for Gujarat Gas with a target price of Rs. 461 in its research report issued on Feb 08, 2021
Dolat Capital Market’s research report on Gujarat Gas
Gujarat Gas results were in line with estimates on revenue front and above estimates on profitability front. Volumes were at 1,053 mmscm which was an increase of 22.9%YoY and of 16.2% QoQ, with industrial segment growth at 28.9% YoY and 16.6% 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% to Rs 27.4/scm as 2 price reduction were taken in industrial segment during June-Sep’20 to compete with alternate fuels and healthy EBITDA Spreads of Rs 5.8/scm were clocked in. Gas cost increased sequentially to Rs 19.1/scm. With recent strategy of management to focus on volumes, we believe that operating spreads should sustain at Rs 5/SCM- Rs. 5.5/SCM.
Outlook
Gujarat Gas will benefit from the spurt in demand of natural gas from Morbi and other potential clusters as well as competitive LNG prices over alternate fuels. Recommend Buy with a target price of Rs 461 (DCF Method).