Motilal Oswal's research report on Gujarat Gas
Gujarat Gas (GUJGA) reported a beat on our numbers, driven by better-than-estimated EBITDA/scm (INR5.1) and volume growth (+22% YoY to 12.1mmscmd). Morbi volumes stood at 7.3mmscmd (+33% YoY), while CNG achieved highest ever quarterly volumes. Pivotal was addition of 150 new CNG stations in FY21 totaling to 559 CNG outlets (v/s IGL’s 573 stations). GUJGA indicated total volumes in 1QFY22’TD stands at ~10mmscmd (with the recent month’s volumes at ~9mmsmcd) – amid the second COVID wave impact. Our volume estimates for FY22 were conservative at 12.3mmscmd and thus remain unchanged even after considering the COVID impact.
Outlook
GUJGA has the best RoE profile of 26–30% and is expected to generate FCF of ~INR27.7b over the next two years. The company would supposedly turn net cash in FY22 despite capex plans of INR10b for FY22 and FY23 each (capex would be funded through internal accruals only). Reiterate Buy.
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