Gujarat Gas Ltd - 3QCY10 results in line:: JPMorgan

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Gujarat Gas Ltd Neutral
GGAS.BO, GGAS IN
3QCY10 results in line





• 3Q results in-line: Gujarat Gas reported 3Q profits of Rs565mn (up
26% y/y), which were in-line with our expectations, as volumes
registered a healthy growth, and margins moderated due to a changing
gas mix.
• Volumes remain robust, conversions continue: GGAS volumes were
3.5mmscmd for the quarter, rising 6% q/q. With the delay in KG-D6
ramp-up affecting supply of GGAS's allocation, the company has signed
a 39 month contract for the purchase of 0.5mmscmd of R-LNG
beginning October, to replace the short-term contract which ended
September. The management is also petitioning the government for
alternate allocation of domestic gas supplies. ~6,800 vehicles were
converted to CNG in the quarter, rising from the 5,500 run rate of last
quarter
• Gas mix changes affect margins: With an increasing component of
LNG in the supply mix, along with the full effect of the APM gas price
hike, calculated margins came off ~7% q/q. However, the company does
retain an element of pricing power, not having passed the increasing
costs on completely to users.
• New bidding a possibility for growth: The company is planning to
participate in the current round of the bidding process being carried out
by the PNGRB, and would look for geographic growth opportunities. We
retain our Neutral rating on the stock