ICICI Direct recommended hold rating on Gujarat Gas with a target price of Rs 290 in its research report dated June 08, 2020.
ICICI Direct's research report on Gujarat Gas
Gujarat Gas’ Q4FY20 results were marginally below our estimates on the profitability front while sales volume were above estimates. Revenues increased 39.8% YoY to Rs 2666.6 crore (our estimate: Rs 2281.7 crore). Volumes increased sharply 53% YoY to 9.9 mmscmd. Realisation was at Rs 29.5/scm (our estimate: Rs 29/scm). Gross margins were at Rs 7.1/scm, below our estimate of Rs 8.1/scm. Although gross margins increased QoQ, growth was lower than our estimates due to higher percentage procurement of high priced contracted LNG. Hence, EBITDA was at Rs 426.7 crore, up 67.9% YoY (our estimate: Rs 462.2 crore). Subsequently, PAT increased 111.1% YoY to Rs 245.9 crore (our estimate: Rs 259 crore), also supported by lower tax rate.
Outlook
Currently, sales volume are at 5.5 mmscmd, down ~45% from pre-Covid level. In H1FY21E, we expect report volume de-growth with growth set to be seen from Q3FY21E onwards. In the long term, increase in volumes driven by regulatory tailwinds, further penetration in existing geographical areas (GAs) and aggressive expansion in newly acquired gas will lead to sustainable growth. Due to recent run up in stock price, we revise our rating on the stock from BUY to HOLD and maintain TP of Rs 290 (18x FY22E EPS).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More
