 "Gujarat Gas")
Shares of Gujarat Gas Company surged 6 per cent to Rs 492.55 on the BSE in Thursday’s intra-day trade after the company reported a smart recovery in its total gas sales volume in the January – March quarter (Q4FY23). The board of the largest city gas distribution company in India also recommended a dividend of Rs 6.65 per share for the financial year 2022-23.
The company sold 8.86 mmscmd (million metric standard cubic meters per day) of volume as compared to 7.29 mmscmd registered in the preceding quarter, an increase of 22 per cent. This was due to the sharp correction in the spot liquefied natural gas (LNG) prices, which the company decided to pass on to its industrial customers to improve their competitiveness, Gujarat Gas said in a statement.
The Compressed Natural Gas (CNG) category continues to witness strong momentum, as the consumers started to benefit from favourable government policies announced to protect the interest of CNG and residential Piped Natural Gas (PNG) users, the company said. The central government implemented APM gas policy capping the price of APM gas at $6.5 Immbtu whereas the state government reduced VAT from 15 per cent to 5 per cent thereby making CNG/PNG more affordable, it added.
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Meanwhile, in Q4FY23, the company’s revenue increased 6.6 per cent quarter-on-quarter (QoQ) to Rs 3,929 crore. Realisation was at Rs 49.3/scm, down Rs 5.7/scm QoQ due to price cuts taken by the company. EBITDA for the quarter was Rs 560.3 crore, down 3.8 per cent. Reported profit after tax was at Rs 369.2 crore, flat QoQ.
According to ICICI Securities, Gujarat Gas reported a recovery in sales volume due to the correction in spot LNG prices, which it passed on to its industrial customers to improve competitiveness vis-a-vis alternative fuels.
In the ongoing quarter (Q1FY24E-TD), spot LNG prices have further declined to $12/mmbtu. Domestic gas prices too have been revised to a ceiling price of $6.5/mmbtu, which will reduce the sourcing cost of the company. In the medium term, maintaining balance between volume and margin will be key to the company's performance, the brokerage said in a note.
The company’s Morbi volumes improved substantially to 3.6mmscmd in Q4FY23 (v/s 2mmscmd in Q3FY23) due to the narrowing price gap between natural gas and alternate fuels as a result of price cuts taken by the company in Q4FY23. Currently propane prices are at par with natural gas, while LPG is trading at a discount of Rs 1.5-2/scm.
The company’s long-term volume growth prospects remain robust with the addition of new industrial units, and expansion of existing units, said Motilal Oswal Financial Services. The brokerage reiterated its 'buy' rating on the stock with a target price of Rs 610 (at 26x FY25E EPS). A poor ceramic outlook or a sustained discount of propane/LPG to natural gas can pose a key risk to Gujarat Gas, it added.
