Gujarat Gas Q1 Results Review - Morbi Volumes Surge; CNG Expected To Be Growth Driver: Dolat Capital

Dolat Capital Report

Gujarat Gas Ltd.'s Q1 FY25 earnings are 6% below our estimates, due to higher than-expected other expenses. Volume was in line.

Key Highlights are-

1. PNG-I was a volume growth driver as Morbi consumption up by ~46% QoQ in Q1, although it declined by ~35% QoQ in Q2-to-date on account of container shortage;

2. CNG volume grew by 14% YoY- A consistent growth over last four quarters and highest growth among city gas distributions;

3. Priority segment accounted for 33% of sales volume mix, but contributed ~ 56% to gross profit in Q1 FY25.

We broadly maintain earnings estimates and upwards revise the target price to Rs 502 (versus earlier Rs 480), mainly due to lowering of risk-free rate by 10 basis points. Gujarat Gas is trading at 28 times of FY26E EPS, a premium to long term average and volume growth guidance has been lowered to 7% from 10% earlier. Accordingly, we maintain our ‘Sell’ rating on the stock.

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