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PL Stock Report: Gujarat Gas (GUJGA IN) - Q2FY24 Result Update – Lacklustre industrial volumes - ACCUMULATE
Prabhudas Lilladher Pvt Ltd
Gujarat Gas (GUJGA IN) - Swarnendu Bhushan - Co-Head of Research, Prabhudas Lilladher Pvt Ltd.
Gujarat Gas (GUJGA IN) - Swarnendu Bhushan - Co-Head of Research, Prabhudas Lilladher Pvt Ltd.
Rating: ACCUMULATE | CMP: Rs419 | TP: Rs477
Q2FY24 Result Update – Lacklustre industrial volumes
Quick Pointers:
§ Morbi volume came in at 3.9 mmscmd in Q2FY24.
§ CNG volume grew by 12.9% YoY to 2.6 mmscmd.
We cut FY24/25 EPS estimates by 10.6/9.1% due to reduction in EBITDA/scm estimates. Gujarat Gas (Gujga) reported an EBITDA/PAT of Rs 5bn (+28% QoQ, Ple: Rs 4.1bn) and Rs 3bn (+38% QoQ, Ple: Rs 2.3bn) respectively. Total volumes grew 22% YoY to 9.3 mmscmd, driven by 31.1% YoY growth in industrial volumes. EBITDA/scm came in at Rs 5.8/scm in Q2. The stock is currently trading at 25.7x P/E. We build in 10% CAGR volume growth over FY24-26E. Owing to competition from alternate fuels we estimate an EBITDA of Rs5.5/scm going forward. Maintain ‘Accumulate’ rating with a TP of Rs 477 based on 24x FY26E EPS.
§ Sales volume growth YoY: Total sales volume grew 22.3% YoY to 9.3 mmscmd. The recovery in volumes was led by industrial segment which grew by 31.1% YoY to 5.9 mmscmd. Commercial volumes remained flat YoY at 0.1 mmscmd. Domestic volume grew 1.4% YoY to 0.7 mmscmd. CNG sales increased 12.9% YoY to 2.6 mmscmd. On QoQ basis, total volumes grew 1%. CNG and industrial/commercial volume remained flat QoQ while domestic sales increased by 17% QoQ. Going ahead, we factor in 10% CAGR volume growth of 11.5 mmscmd for FY26E.
§ Margins grow sequentially: EBITDA at Rs 5bn was up 28% QoQ, aided by price hikes undertaken by the company. EBITDA/scm came in at Rs 5.8/scm, up by Rs1.2/scm QoQ. PAT came in at Rs 3bn, up 38% QoQ. On a YoY basis, EBITDA and PAT fell 23% and 26% respectively. For H1FY24, EBITDA stood at Rs 8.8bn, down 29.2% YoY while PAT fell 34.7% YoY to Rs 5.1bn. Going forward, we anticipate an EBITDA/scm of Rs 5.5/scm for FY24-26E.
§ Conference Call highlights: 1) EBITDA/scm guidance stands at Rs4.5-5.5/scm. 2) Management has guided 10% YoY volume growth for medium to long term led by CNG and industrial segment. 3) Morbi volume for Q2 was 3.9 mmscmd expected to remain in the range of 4 mmscmd for next few months. 4) Q2 average realization for ceramic units was Rs 41-42/scm, while that for non-ceramic units was higher at Rs48/scm. Current realization for ceramic units is Rs48-48.5/scm 5) Total market size in Morbi is 8 to 8.5 mmscmd and is currently running at 75-80%. Propane accounts for 3 to 3.5 mmscmd, while gas accounts for 4 mmscmd. 6)Spot LNG exposure is currently 35% for industrial customers and rest is long term. 7) APM shortfall was 10-12% in Q2 and company has sourced HPHT gas to bridge the gap.
