Gujarat Gas Q3 Results Review - Lower-Than-Expected Margin Drives Miss: Motilal Oswal

Motilal Oswal Report

Gujarat Gas Ltd.'s Ebitda came in below our estimate at Rs 4 billion in Q3 FY24 as both margin and volumes were weak. Ebitda/standard cubic metre stood at Rs 4.8 and total volumes came in at 9.2 million metric standard cubic metre per day.

The management highlighted that they are expecting an increase in demand from rural areas specially in the outskirts of Ahmedabad and Thane areas. Gujarat Gas has been able to capture significant compressed natural gas volumes from rural areas and that there is a significant demand for CNG in newer geographical areas.

The management highlighted that the CNG business has seen more than 300% growth in the last five years, with four major original equipment manufacturers supplying or marketing more than 24 models in the market.

Gujarat Gas expects CNG penetration to grow from 11% in CY23 to 18% in CY27, with better availability of supplies, new CNG model launches, the strengthening of CNG infrastructure, and a reduction in CNG prices.

We increase our Ebitda/profit after tax estimates by 15%18% for FY25 and 15%/17% for FY26 as we increase our margin assumption to Rs 6.5/Rs 6.6 per scm for FY25/FY26.

Gujarat Gas’ long-term volume growth prospects remain robust, with the addition of new industrial units and the expansion of existing units. Hence, we reiterate our 'Buy' rating on the stock with a target price of Rs 675 (at 28 times Dec-25E EPS).

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.