Margins expand; outlook improves
Price hikes across segments during the beginning of Q3 led to Gujarat Gas’s
stupendous performance with 16.2% YoY and 79.6% QoQ jump in adjusted
PAT (adjusted for other income) at Rs935mn (reported PAT at Rs1,001mn).
Although LNG prices softened on a sequential basis, ~2% QoQ rupee
depreciation led to flattish gas sourcing cost. Going ahead the company is
likely benefit from both rupee appreciation and lower LNG prices. We thus
expect an improvement in operational performance in Q4 and in CY13E.
However, the near term stock performance is likely to follow the open offer
price (at Rs314.2/share). Based on our revised estimates we upgrade the stock
to ‘Neutral’ from Sell.
Price hike at the beginning of Q3 leads to higher average realisations:
GujGas’s average distribution realisations grew by 42.6% YoY and 6.2% QoQ
to Rs28.1/scm owing to the price hikes across segments at the beginning of
the quarter. Distribution volumes that were marginally up QoQ at
3.2mmscmd, were however down 9.5% YoY primarily due to YoY increase in
retail prices by a whopping 30-40%.
Gross margins, EBITDA/scm expands: Price hikes across segments without
any increase in sourcing cost led to expansion in gross margin from Rs4.6/scm
in Q2 to Rs6.1/scm in Q3 and EBITDA/scm from Rs2.7/scm to Rs4.4/scm in Q3.
Spot LNG prices have been softening and hence the sourcing cost was
contained despite ~2% average rupee depreciation sequentially. Thus
average natural gas sourcing cost remained flattish at Rs22.0/scm while
jumping by over 46.7% YoY from Rs15.0/scm.
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