Motilal Oswal's research report on Gujarat Gas
Total volumes came in lower-than-expected at 7.6mmscmd, with Morbi volumes at 2.7mmscmd, impacted by the shutdown of ceramic units of over a month in 2QFY23. EBITDA margin was in line at INR9.2/scm (our estimate of INR9/scm). Current sales stand at 8mmscmd. LPG consumption at Morbi stood at 0.8- 1mmscmd, with a discount of INR6/scm v/s gas. Propane consumption at Morbi stood ~2.5mmscmd, which is currently at a discount of INR12-13/scm. Spot LNG prices in 3QFY23 till date have fallen to USD28.9/mmBtu v/s USD45/mmBtu in 2Q. A further cooling of these prices will result in a volume recovery. We estimate an EBITDA/scm of INR7.1/INR6 in FY23/FY24 v/s INR5.3 in FY22.
Outlook
We maintain our Buy rating on the stock, with a TP of INR583 (at 28x FY24E EPS). Any underperformance in terms of EBITDA/scm or volume growth v/s our projection can pose a key risk to GUJGA.
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