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India Equity Research Reports, IPO and Stock News
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TP : Rs481
Investment Rationale
§ Volumes to grow at a CAGR of 6.6% from 3.4mmsmcd in CY10 to 3.8mmscmd in CY12E, led by huge demand
from industrial and CNG segment to drive volume growth
§ Industrial and CNG segment - Key volume and revenue drivers in the segment:- which provides higher revenues &
better margins. we expect industrial volume to grow at 5.5% CAGR to 1123mmscm in CY12E and CNG volume to
grow at 15.5% CAGR to 166mmscmd in CY12E
§ Supply outlook remains robust backed by long term RLNG and KG D6 gas
§ Increase in selling price across segments result in a margin expansion on QoQ basis: During Q2 CY11
EBIDTA/scm has increased by 26.6% QoQ and 36.5% YoY.
§ Authorization from PNGRB expected soon: positive trigger for GGCL to expand in the existing cities
Valuations
§ Our EPS estimate of Rs.23.1 and Rs.26.4 for CY11E and CY12E respectively, imply an earnings CAGR of 15%
over CY10-12E. GGCL is one of our top picks given its monopoly in cities like Surat, Bharuch, Valsad, and
Ankleshwar, expected volume growth plus zero debt and robust business model with no commodity risk. We
believe that concerns on volume growth and pricing pressure have eased and any dip should be used as an
opportunity to accumulate the stock. At CMP of Rs.452, stock trades at 16.6x, one year forward P/E and 3.6x
P/BV. We recommend BUY on GGCL with a target price of Rs.481 based on SOTP valuation.
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