ICICI Direct's research report on Gujarat Gas
Gujarat Gas reported its Q1FY20 results above our estimates mainly on account of a robust increase in volumes. Total reported volumes increased 42.2% YoY and were at 9.2 mmscmd vs. our estimate of 8.4 mmscmd. Volumes were above our estimates on account of higher sales volumes from Morbi that led to industrial volumes of 7.1 mmscmd vs. 4.3 mmscmd QoQ. Hence, revenue increased 48.1% to Rs 2,614.6 crore (our estimate of Rs 2,473 crore). Gross margins were at Rs 8/scm, (~up 12.4% YoY), above our estimate due to lower LNG prices. Subsequently, PAT increased 91.6% to Rs 234 crore vs. Rs 122.1 crore (our estimate of Rs 161.8 crore).
Outlook
Also, a rapid expansion by way of securing licences in newer areas will lead to sustainable volume growth. We value Gujarat Gas at 18x FY21E EPS of Rs 11.5 to arrive at a target price of Rs 205 with a BUY recommendation.
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