Sharekhan has given Buy recommendation for Gujarat Gas with a target price of Rs. 630 in its research report issued on Jun 02, 2021
Sharekhan’s research report on Gujarat Gas
Q4FY21 PAT at Rs. 350 crore, up 42% y-o-y and beat of 29% versus our estimate led by strong volume growth of 22% y-o-y to 12.1 mmscmd and lower contraction in EBITDA margin at Rs. 5.1/scm (down 13.3% q-o-q vs. our estimate of 25% q-o-q fall). Robust volume growth was driven by 24.5% y-o-y rise in industrial PNG volume to 9.6 mmscmd despite a rise in gas price and strong CNG/domestic-PNG volume at 1.7 mmscmd/0.7 mmscmd, up 10.9%/14.4% q-o-q. Management is upbeat on volume growth and has guided for a 10% rise annually, for the next couple of years on a high base of Q4FY21; focus on efficient gas sourcing (higher share of long-term LNG and domestic gas) to ensure margins of Rs. 5.5/scm. GGAS is likely to clock the highest volume CAGR of 21.6% over FY21-FY23E among CGD players and thus we expect its valuation gap of 9% with IGL to close going ahead.
Outlook
We maintain a Buy rating on GGAS with an unchanged PT of Rs. 630.