Emkay Global Financial's research report on Gujarat Gas
Gujarat Gas (GGL) reported Q2FY23 EBITDA/PAT of Rs6.43bn/4.04bn (up 53%/65% YoY and 6% each QoQ), at 33%/40% above our estimates on gross margin beat, as lowerthan-expected volumes led to decline in spot LNG intake and, hence, reduced gas cost. Total gas sales volume fell 33% YoY and 22% QoQ to 7.6mmscmd (a 3% miss). Industrial PNG was down 49% YoY/33% QoQ to 4.5mmscmd, owing to Morbi. CNG rose 18% YoY but was down 5% QoQ, at 2.3mmscmd. Domestic PNG was up 8% YoY, at 0.7mmscmd. Net realization fell 3% QoQ, while unit gas cost declined 10%, resulting in 32% expansion in gross margin to Rs13/scm (at a 27% beat). Unit opex jumped to Rs3.8/scm. EBITDA/scm was up 34% QoQ to Rs9.2 (up, over 2x YoY).
Outlook
We tweak our EPS estimates, assuming lower volumes albeit higher margins now, and cut our TP by 4% to Rs520. Owing to the recent stock run-up and the volatile winter, with competition from propane and potential price cuts, we downgrade GGL to HOLD from Buy.
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