A lower than projected gas cost has helped Gujarat Gas Ltd beat Street expectations on earnings before interest, tax, depreciation and amortization (Ebitda) for the three months ended March (Q4 of FY22). Standalone EBITDA was 697 crores, almost surpassing the Bloomberg consensus estimate 490 crores.
Ebitda per standard cubic meter (scm) in Q4 was 7.8, faster improvement than 2.3 Seen in Q3FY22 and 5.1 in Q4FY21. With the stock of City Gas Distribution Company rising 6% on Wednesday, there was no place for investors’ happiness.
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Industrial volume of Gujarat gas was lower by 6.7 mmscmd (million standard cubic meters per day) in Q4 as demand remained subdued. This had an impact on the overall volume. In Q4, average gas sales volume was 9.89 mmscmd, down 18% year-on-year and 13% sequentially.
“Spot LNG (liquefied natural gas) prices were high in Q4, averaging around $31/mmBtu ($35/mmBtu in Q3). Also, APM (administered pricing mechanism) gas availability was limited in the previous quarter as well. Hence, gas sales were optimized to avoid price escalation for customers and ensure profitability for the company,” said Nitin Tiwari, analyst at Yes Securities, adding that less reliance on costly LNG helped the company in its operations during the quarter. Helped to increase margins. said.
The outlook has improved. The company has said that the total gas sales volume is now above 10.5 mmscmd. Compressed Natural Gas (CNG) sales are showing good growth here. Industrial demand from Morbi cluster is also recovering sequentially. Gujarat Gas has raised prices, which will also support margins.
“While we were already gradually improving Morbi volumes in FY23E, we are now increasing our FY23E EBITDA margin 4.5/scm to 5/scm also taking into account the full year EBITDA margin of FY22 5.3/scm is impressive given the tough macro,” said a report by Jefferies India led by analyst Prateek Choudhary.
The broking firm has left its FY24E EBITDA margin unchanged Given the potential upside risk in the event the 5/scm spot LNG returns to normal during the next year. Spot LNG prices have eased from recent highs, but this rise is a risk for Gujarat Gas stocks. Meanwhile, the stock is still up 31.6% from its 52-week high 786 was seen in August on NSE. To that extent, the evaluations are reasonable.
According to data from Bloomberg, the stock is currently trading at around 22 times estimated earnings for FY24.