Buy Gujarat Gas between Rs 751.40 & Rs 738. Stoploss at Rs 710 :: HDFC securities

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Details on merged entity few quarters away • Gujarat Gas :: ICICI Securities, link

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Higher sourcing cost leads to muted performance- GujGas:: Centrum

Higher sourcing cost leads to muted performance
High LNG prices coupled with lower domestic gas supplies led to GujGas’ muted Q1 performance with operating margin at 9.4% and operating profit at Rs722mn against our expectations of 13.2% and Rs1,022mn respectively. The company hiked its industrial retail prices from April 1, 2013 which, along with softening LNG prices, is expected to benefit performance going ahead. Reorganisation with GSPC as parent is expected to take some time and its benefits will be felt subsequently. GujGas enjoyed higher valuations due to its MNC parentage and high dividend payout which we believe may not sustain going ahead. Volume growth too remains a near term concern. Hence, we have lowered our P/E multiple for the stock from 14x earlier to 12x and maintain ‘Buy’ with a reduced target price of Rs283 (earlier Rs341).

Price hike in February benefits realisations: GujGas’s average distribution realisations jumped by 3.1% QoQ at Rs28.9/scm on account of price hikes effected on February 1, 2013 in industrial retail segment. Distribution volumes though remained flattish sequentially at 2.9mmscmd impacted by lower domestic gas availability and higher LNG prices.

Higher LNG prices and lower domestic gas availability impact EBITDA/scm: Lower domestic gas availability (from PMT) and higher LNG prices led to 9.1% QoQ and 24.6% YoY increase in blended gas cost which stood at Rs24.4/scm thus lowering EBITDA/ scm to Rs2.5/scm from Rs3.9/scm in Q4.

Margins dip on high cost LNG; volume to improve Gujarat Gas Company :: SBI Caps

Margins dip on high cost LNG; volume to improve
Gujarat Gas Company Ltd’s (GGAS) 1QC13 results on operational front were in-line
with SSLe on lower volume and higher LNG cost. Net sales of the company
increased 18.9% YoY and 0.8% QoQ to Rs7.6bn (in-line with SSLe of Rs7.5bn) led
by improved realisation. On February 1, 2013, GGAS took ~4.2% price hike in
industrial segment and 8.5% in CNG. However, due to increased LNG cost, the
blended gas cost increased 34.8% YoY and 9.1% QoQ to Rs24.4/scm (LNG prices
were high up to US$20/mmbtu in January – February) leading gross margin to dip to
Rs4.5/scm compared to Rs5.7/scm in 4QC12 (SSLe Rs4.3/scm). EBITDA declined
35.6% QoQ to Rs672mn. With higher other income, decline in PAT was limited to
Rs595mn (declined 15.6% QoQ).
Gas sales volume declined 16.2% YoY and 2.2% QoQ to 264mmscm due to lower
volumes in industrial segment as gas cost was high.
Outlook and valuation: Rupee depreciation, steep rise in global LNG prices and
economic slowdown, impacted GGAS’s gas sales volume in C12. 1QC13 too
witnessed volume pressure due to high cost LNG. However, now the LNG prices
have softened and the company expects sales volume to pick up. Margins are also
expected to improve from hereon in view of price hikes. Bottom line of the company
is expected to remain sub-dued for next two years on lower sales volume; however, in
long term the company plans to improve volume to increase bottom line. We have
build in sales volume of 3/3.2mmscmd in C13/C14 respectively.
GGAS received authorization from the Petroleum and Natural Gas Regulatory Board
(PNGRB) for the city gas distribution areas of Surat, Bharuch and Ankleshwar. The
company has filed tariff application with PNGRB for its transmission pipeline.
However, due to high ROE of over 30%, the company is vulnerable to tariff reduction
from PNGRB, as was ordered for Indraprastha Gas.
At CMP, the stock seems to factor in all negatives. We expect better financial
performance of the company going forward with gas sales volume to pick up
gradually. We have valued the stock on 12xC14e earnings and recommend HOLD
rating on the stock with a revised target price of Rs272.

Gujarat Gas: Sell In Open Offer :: Business Line

Gujarat Gas -Margins expand; outlook improves :: Centrum

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.

Gujarat Gas Q3CY12 result update :LKP Research

Strong performance driven by price hikes, volumes remain subdued

GGCL’s net profit of Rs995mn was higher than our estimate of RS737mn mainly on account of higher realizations during the quarter. The company had taken a price hike of 9.6% in the key industrial segment w.e.f. 1^st July 2012. However, volumes for the quarter were subdued at 295mmscm (yoy -9.5% qoq +2.1%). Gas cost for the quarter remained constant on a sequential basis at Rs22/scm (yoy +46.7%) as LNG prices softened during the quarter. Consequently gross margin increased by 33.7% sequentially to Rs6.1/scm (yoy +29.5%). GGCL reported its highest ever EBITDA/scm of Rs4.4 (yoy +33.8% qoq +66.4%).

We maintain our SELL rating on the stock with a target price of Rs289. At the CMP, the stock is trading at 14.2x and 9.5x CY13e EPS and EBITDA respectively.

Gujarat Gas Sell Target Price: Rs305 :: Centrum

Gujarat Gas

Sell

Target Price: Rs305

CMP: Rs336

Downside: 9.1%

From global to local

GSPC is all set to buy BG’s 65.12% stake in Gujarat Gas (GujGas) for Rs246.4bn. After long negotiations and bidding, GSPC is paying Rs295/share for BG’s stake in GujGas. However, the price paid is at about 12% discount to the closing price on October 3, 2012. Earlier, BG expected higher valuations from the deal but had to settle for less given the regulatory environment for CGD business in India. We remain skeptical on GujGas’ volume growth and hence urge investors to sell in the open offer.

Sizzling Stocks - Adani Power , Gujarat Gas:: Business Line

Technical Analysis: Cadila, Gujarat Gas, Bank of India, Pidilite, NIIT tech, Lovable Lingerie, : Business Line,

Gujarat Gas Company :Valuation Support May Erode on BG Divestment : Nirmal Bang

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Valuation Support May Erode on BG Divestment
Gujarat Gas Company (GGCL) enjoyed higher valuation on the back of being a
subsidiary of global gas major British Gas (BG) but with BG showing its
intention to exit, the premium on valuation is likely to erode. With earnings
growth momentum declining following slower volume growth and limited pricing
power, we assign a Sell rating to the stock with a target price of Rs358.

Gujarat Gas :BG stake sale to keep the stock price in check : Centrum

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BG stake sale to keep the stock price in check
Gujarat Gas (GGAS) reported dismal set of numbers for Q4CY11 with bottomline
declining by 70.0% YoY and 69.4% QoQ to Rs247mn on the back of rupee
depreciation and higher spot LNG prices. Since GGAS’ entire sourcing is dollar
denominated, rupee depreciation took a toll on the operating performance,
further hampering profitability. The company hiked CNG prices marginally
during the quarter but did not raise prices for other segments. Q1CY12 would
be a better quarter as the company raised prices for all the segments
(industrial retail, PNG etc.) excluding CNG. Devoid of any new natural gas
sourcing, distribution volumes remained stable during CY11 on a YoY basis.
We have thus lowered our earnings for the company and downgraded our
rating to Hold from Buy. However, we believe that the near term stock
performance would be dependent on the pricing for BG stake sale.
􀂁 Realisations jump sequentially owing to price hikes: GGAS’ revenues
remained almost stable QoQ at Rs6.5bn but average realisations jumped 3.5%
QoQ at Rs20.4./scm due to the full effect of the price hikes effected during
Q3CY11. Distribution volumes declined 3.7% QoQ to 3.4mmscmd due to
seasonality factor.
􀂁 EBITDA/scm plummets to Rs0.7/scm: GGAS’ Q4 performance was impacted
by over 16% QoQ jump in gas sourcing cost. Gas sourcing cost was higher due
to rupee depreciation and higher spot LNG prices. Since GGAS’ entire gas
sourcing is dollar denominated, the increase in sourcing cost devoid of any
hike in gas prices led to EBITDA/scm declining to Rs0.7/scm from Rs3.3/scm in
Q3 and Rs3.9/scm in Q4CY11. Operating profit thus plummeted by a massive
74.6% QoQ and by 76.8% YoY to Rs300mn.

Gujarat Gas Company: Result Update: EMKAY (pdf link)

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Gujarat Gas Company Reco: ACCUMULATE CMP: Rs 389 Target Price: Rs 448 Depreciation of rupee drags margin and profitability ·      GGCL reported results which were significantly below street and our estimates with revenues at Rs.6.5bn and PAT at Rs0.2bn, mainly due to depreciation of rupees and higher Spot LNG prices which drags the overall profitability ·      EBIDTA at Rs.0.29bn, against Rs.1.2bn, decline of 77.4% YoY. Operating margin declined by 1357bps to 4.5% sequentially. Gross margin declined by 46% QoQ to Rs2.5/scm ·      Natural gas volume sold during the quarter was 314mmscm, decline of 3.7% QOQ and flat on YoY ·      Lowered our TP by 6.8% to Rs.448 on the back of lower volume assumption. Also recent news on proposed cap on gas marketing margin which is to be decided by PNGRB would keep the stock under pressure until any clarity emerges

Click here to read report: Result Update

Hold Gujarat Gas; Target :Rs 394 : ICICI Securities, pdf link

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B a d   q u a r t e r … o n l y   a n   a b e r r a t i o n …
Gujarat Gas reported a disappointing set of results for Q4CY11 with PAT
declining 70.2% YoY from | 82.5 crore to | 25 crore. Sharp rupee
depreciation, higher gas costs as well as lower than expected realisations
dented profits for the current quarter. However, revenues for Q4CY11
increased 26.8% YoY to | 651 crore mainly on account of higher
realisations to pass on the costs. EBITDA margins declined 2060 bps YoY
and 1340 bps QoQ to 4.6% on account of a decrease in gross margins
from | 5.0 per scm in Q3CY11 to | 2.6 per scm in Q4CY11. The volumes
stood at 315 mmscm (3.4 mmscmd) for Q4CY11. We have revised our
volume estimates to 3.6 mmscmd (1332.4 mmscm) in CY12E factoring in
volume growth at higher LNG prices. The gross margins would improve
as the company has increased sales prices to pass on higher LNG costs to
customers. We estimate a 34.8% and 29.2% increase in revenues and net
profits, respectively in CY12E. We recommend a HOLD rating on the stock
with a price target of | 394.

Gujarat Gas :: 2QFY2012 Result Update :: Angel Broking

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For 3QCY2011, Gujarat Gas (GGAS) reported a good performance on the
revenue, EBITDA and PAT front. Growth during the quarter was led by higher
realization. We remain Neutral on the stock.
Higher realization drives top-line growth: For 3QCY2011, GGAS reported
top-line growth of 28.7% yoy to `653cr mainly on account of higher realization.
Average sales realization stood at `19.7/scm (up 24.7% yoy), driven by hike in
selling prices of the industrial retail and CNG segments.
Other income boosts net profit growth: Cost of goods sold during the quarter
increased by 28.8% yoy to `490cr on account of higher proportion of expensive
RLNG sales coupled with INR depreciation against the USD. Hence, the
company’s EBITDA grew by 30.4% yoy (in-line with net sales growth) to `118cr.
Other income during the quarter grew by 100.9% yoy to `10cr. Consequently, the
company’s net profit grew by 41.5% yoy to `80cr.
Outlook and valuation: GGAS still awaits authorization from PNGRB for its areas
of operations. However, to pursue growth, the company has bid for a new area
within Gujarat under the third round of bidding conducted by PNGRB. Besides
volume growth, to maintain margins, the company plans to price its gas as per
the pricing of alternative fuels. At current levels, the stock is trading at 17.8x
and 15.9x CY2011E and CY2012E earnings, respectively. We believe the
stock is fairly valued at current levels and, hence, maintain our Neutral stance
on the stock.

Hold Gujarat Gas; Target : Rs 410 ::ICICI Securities

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P A T   d e c l i n e s   Q o Q   o n  h i g h e r   g a s   c o s t s …
Gujarat Gas’ revenues for Q3CY11 increased 28.8% YoY to | 653.3 crore,
above our estimates, mainly on account of higher-than-expected gas
sales volumes (326 mmscm) for the quarter. EBITDA margins increased
20 bps YoY to 18% on account of an increase in gross margins from | 4.0
per scm in Q2CY10 to | 5.0 per scm in Q3CY11. However, the gross
margins per scm decreased by | 1.1 per scm QoQ on account of higher
gas costs. The net profit for Q3CY11 increased 43.1% YoY to | 80.9 crore,
lower than our estimates on lower than expected margins per scm. We
have revised our volume estimates to 3.5 mmscmd (1260.5 mmscm) and
3.9 mmscmd (1388.2 mmscm) in CY11E and CY12E, respectively,
factoring in volume growth at higher LNG prices. Gross margins would
continue to remain strong as the company has been able to pass on
higher LNG costs to customers. We estimate CAGR of 28% and 24%
increase in revenues and net profits, respectively, over CY10-12E. We
recommend a HOLD rating on the stock with a price target of | 410.
ƒ Highlights of the quarter
Gujarat Gas reported a 3.5% YoY increase in gas sales volume from
315 mmscm in Q3CY10 to 326 mmscm in Q3CY11. The volume for
Gujarat Gas was ensured by the higher YoY procurement of shortterm LNG for the current quarter. Realisations increased by 24.9%
YoY from | 16.1 per scm in Q3CY10 to | 20 per scm in Q3CY11 to
pass on higher LNG cost to customers. EBITDA margins stood at |
3.6 per scm in Q3CY11.
V a l u a t i o n
The firm contracts for LNG would increase its gas sales volume from 3.3
mmscmd (1212 mmscm) in CY10 to 3.5 mmscmd (1260.5 mmscm) and
3.9 mmscmd (1388.2 mmscm) in CY11E and CY12E, respectively. Gujarat
Gas is trading at price/BV of 4.5x CY12E and has an RoNW of 32.3%
CY12E. We have valued the stock based on the DCF methodology (WACC
– 12%, terminal growth - 3%) to arrive at a target price of | 410.

BUY Gujarat Gas Company - Results inline with expectation :: Emkay

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Gujarat Gas Company

Results inline with expectation

BUY

CMP: Rs 444                                       Target Price: Rs 481

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n     GGCL reported results which were inline with our estimates with revenues at Rs.6.5bn and PAT at Rs0.8bn, mainly due to higher volume growth & better realisation during the quarter

n     EBIDTA at Rs.1.2bn, against Rs.0.9bn, growth of 30.4% YoY. Margin declined by 587.9.bps to 18% sequentially. Gross margin declined by 20% QoQ to Rs4.7/scm

n     Natural gas volume sold during the quarter was 326mmscm, growth of 8% QOQ and flat on YoY

n     Given its monopoly in cities of Gujarat, expected volume growth plus zero debt and robust business model with no commodity risk, We maintain BUY rating with TP of Rs.481

Gujarat Gas:: Emkay: Top Buys

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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.

For full list click link below:

Emkay: Top Buys and Sells

Revisiting Gas Theme - I: Defensive allure priced in for PLNG, CGDs; downgrade PLNG, Gujarat Gas to N :JPMorgan

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Petronet LNG (PLNG), Indraprastha Gas (IGL), and Gujarat Gas (GGAS)
have strong defensive allure in view of their domestic-oriented growth
visibility. We believe the 15-26% stock performance over the past three
months does, however, price in the defensive attributes even as we see
challenges to the growth trajectory from infrastructure constraints and
price acceptability of LNG. We downgrade PLNG and GGAS to Neutral,
and stay UW on IGL.
 We have been wrong on IGL, so far: IGL has been one of the
strongest performers in the Indian gas utility space. Pricing power and
strong volume growth in the piped gas segment has led to better-thanexpected
margins and earnings. In our view, the stock price builds in
optimism about continued volume growth, which could be challenging
in the piped gas segment, with incremental growth dependent on highcost
LNG. While we continue to expect robust growth in the PNG
segment, we believe this growth will entail margin sacrifice as spot LNG
prices are near those of their liquid fuel equivalents (fuel oil).
 PLNG – margins at a high; infrastructure constraints bite: PLNG's
strong 1Q FY12 results reflect the bid on LNG capacity we had
expected. With spot volumes constrained by infrastructure over the next
1.5 years, and with little scope for margin expansion, we believe the
current stock price is building in a premium for limited regas capacity in
India. Consequently, we downgrade the stock to Neutral. Clarity on the
domestic gas ramp-up would be negative for stock performance.
 GGAS – better adjusted CGD: GGAS’s business model and stock
price are better aligned to the challenges facing CGDs, in our view.
Management has a cogent strategy to meet supply and margin
challenges. While we remain positive on the LT prospects for CGD, we
believe GGAS’s performance will be constrained, especially after the
26% performance over the past four months. Downgrade to Neutral.
 Risks to our view – defensive allure could be too strong to resist:
While we believe the stock prices reflect the growth opportunity for gas
utilities in India, with little allowance for operational slippage, we note
that in the current market conditions, the stocks provide good visibility
on growth given their micro, domestic biases.

Gujarat Gas Company - Higher realisation drives profitability BUY::Emkay

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Gujarat Gas Company

Higher realisation drives profitability

BUY

CMP: Rs405                                        Target Price: Rs481

---

n     GGCL reported results which were marginally above our estimates with revenues at Rs.5.8bn and PAT at Rs.0.9bn, primarily due to better realisation during the quarter

n     EBIDTA at Rs.1.3bn, against Rs.0.9bn, growth of 51% YoY. Margin expanded by 334bps to 23.9% sequentially. Gross margin grew by 26.6% YoY and 36.5% QoQ to Rs.5.9/scm

n     Natural gas volume sold during the quarter was 302mmscm, marginal growth of 1.8% YoY and flat on sequentially

n     Given its monopoly in cities of Gujarat, expected volume growth plus zero debt and robust business model with no commodity risk, We maintain BUY rating with TP of Rs.481