Dolat Capital's research report on Gujarat Gas
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 industrial segment growing at 57% YoY and 68% QoQ. Major growth in industrial segment has come from Morbi region post NGT’s 6Mar’19 order to ban the use of coal gasifiers in Morbi region.
Outlook
Gujarat gas will benefit from the spurt in demand of natural gas from Morbi region as well as competitive LNG prices over alternate fuels. Upgrade to Buy with a target price of ` 216 (DCF Method).
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