with a market valuation of 29,074 crore, Gujarat Gas Limited is a large-cap company dealing in the gas and petroleum industry. Gujarat Gas Limited (GGL) is India’s largest City Gas Distribution (CGD) company by sales volume as the company has active gas distribution permissions in 43 districts of 6 states and 1 union territory including Gujarat, Maharashtra, Rajasthan, Haryana Huh. Punjab, and Madhya Pradesh, as well as the union territories of Dadra and Nagar Haveli. In the CGD industry, Gujarat Gas has more than 17 lakh individuals, over 13,600 commercial customers, 711 CNG outlets, more than 4,300 industrial plants, and more than 32,890 km of natural gas pipeline system and the company also has the capacity to produce more . Gas in excess of 10.5 mmscmd gas volume.
52-week high for Gujarat Gas Limited (GGL) shares at Rs. 786.00 on August 4, 2021, and 52-week low of Rs. 403.55 on June 23, 2022, which means its current price is Rs. 423, the stock has risen significantly by 4.81 per cent from its 52-week low and is currently trading at a discount of 46% to its 52-week high. ICICI Securities, a brokerage company that is bullish on the stock has placed a buy call with a target price of 566, which represents a potential gain of 33% from the current price.
ICICI Securities in its report said that “Gujarat Gas (GGL) presents an excellent opportunity to enter the stock at current levels, given the multiple concerns of the stock price (down 14% in the last 3 months)”. Volumes and margins are among many concerns. In fact, higher gas costs for the next 12 months CGD, stagnant petrol and diesel prices (due to price hikes) and, for GGL, the threat of large-scale propane migration to Morbi However, we believe that the current valuation of 19.7x FY24E EPS, 11.5x EV/EBITDA over-factors in downsides from near-term stress and completely ignores GGL’s long-term business strength. In addition, our assessment of the volume hit through propane and margin is less risky than consensus estimates, so we remain positive on GGL from an 18-24-month outlook.”
The brokerage also clarified that “GGL is aggressively expanding into new areas that it has been developing gradually over the last 3-4 years, with some slowdown in FY 2020-21 due to Covid related constraints. is being viewed. FY2012 saw investment pick up with capital expenditure of Rs 13 billion and guidance for capital expenditure of Rs 11-12 billion remains in place to support volume growth guidance of 10-11% over a sustained period “
“After the recent 14% drop in the stock price (last 3 months), GGL stock presents an attractive opportunity to enter. Taking cognizance of the uncertain cost and margin environment, we assume a more conservative estimate for volumes and margins for FY23/24E, meaning a reduction of 20% (FY23E) and 10% (FY24E) for EPS and Rs. Less TP of 566/sh (Earlier: Rs.650/hr). The current multiples are attractive even on these earnings of 19.7x FY24E per and 11.5x EV/EBITDA. Buy,” said ICICI Securities.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.