Gujarat Gas, Deepak Nitrite, Aditya Birla Fashion, Gujarat State Petronet, Q3 Result Review: HDFC Securities

HDFC Securities Institutional Equities

Gujarat Gas - Margin weakness persists

Our 'Add' recommendation on Gujarat Gas Ltd., with a price target of Rs 600/share, is premised on-

1. volume growth of only ~10% compound annual growth rate over FY24-26E compared to ~18% volume growth seen over FY19-22 and

2. increased pricing competition from alternate fuel in the industrial/commercial segment.

Q3FY24 Ebitda/profit after tax at Rs 4/2.2 billionn came in below our estimates, owing to lower-than expected volumes and per unit Ebitda margin. Volume stood at 9.16 milliom metric standard cubic metre per day (+26% YoY, -2% QoQ).

Deepak Nitrite - Margin remains under pressure

We maintain 'Sell' on Deepak Nitrite Ltd., with a price target of Rs 1,448 (WACC 12%, terminal growth 4%). The stock is currently trading at 26 times FY25E earnings per share, which we believe is contextually high. Ebitda/adjusted profit after tax were 7/6% below our estimates, owing to higher-than-expected raw material cost, which came in 8% above our estimates.

Gujarat State Petronet - Higher tariff offsets volume weakness

Our 'Add' rating on Gujarat State Petronet Ltd. with a target price of Rs 400/share is premised on-

1. volume growth of ~7% CAGR over FY24-26E and

2. limited upside triggers in the near term.

Hence, we believe that, at present, the stock is fairly valued with a return on equity of 17.1/16.3/15.7% in FY24/25/26E and a combined free cash flow of Rs 42 billion over FY24-26E.

Suprajit Engineering - Good performance despite macro headwinds

Suprajit Engineering Ltd.’s Q3 PAT at Rs 402 million was marginally lower than our estimate of Rs 443 million. Revenue growth of 5% YoY was led by the automotive business (36% of total sales).

The non-automotive segment (17% of total sales) has been muted for a few quarters now and the pain is expected to continue for a few more quarters.

Suprajit Engineering expects the benefits of new business acquisitions to mitigate the impact of non-auto segment decline. It expects strong double-digit growth in the automotive segment in FY25 and FY26 and we believe it will continue outperforming India’s auto industry growth, given its track record.

Suprajit Engineering is emerging as one of the major beneficiaries of the global de-risking strategy by OEMs in the cables business as it remains amongst the very few large players with the ability to supply from multiple low-cost locations globally based on OEM requirements.

The new products division of Suprajit Engineering is seeing an extremely encouraging response from OEMs and helping evolve the company as a “beyond cables” player.

Reiterate 'Buy' with a target price of Rs 463, valued at 21 times FY26 earnings.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.