Emkay Global Financial has given Buy recommendation for Gujarat Gas with a target price of Rs. 475 in its research report issued on Feb 06, 2021

Emkay Global Financial’s research report on Gujarat Gas

Gujarat Gas posted Q3FY21 EBITDA/PAT of Rs6.15bn/3.92bn, up 66%/100% yoy, down 16%/17% qoq and 40%/56% above estimates on a 6% volume beat and a 32% EBITDA/scm beat. Interest cost declined 28% qoq, with net debt down 19% to Rs7.0bn. Gas sales volumes grew 16% qoq (23% yoy) to 11.45mmscmd. Industrial PNG was up 17% qoq (29% yoy) to 9.2mmscmd, with Morbi up 20% to ~7.0mmscmd. On a yoy basis, CNG/Dom. PNG/Comm. PNG was up 2%/up 11%/down 18% to 1.5/0.6/0.1mmscmd. Net realization fell 3% qoq, while gas cost rose 9%, resulting in a gross margin decline of 24% qoq to Rs7.8/scm (an 18% beat though). Opex/scm fell 10% qoq to Rs1.9 (down 12% yoy and 12% below est.). EBITDA/scm came in at Rs5.8, down 28% qoq/up 35% yoy.


We raise FY21/22/23E EPS by 14%/16%/13%, building in 5-7% higher volumes as well as EBITDA/scm each, based on strong run-rate and management guidance. We increase our DCF-based TP by 27% to Rs475 with a lower 10% WACC. Retain Buy with OW.

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