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Centrum Broking
Gujarat Gas (Buy)
CMP: ₹288.6
Target: ₹315
Gujarat Gas reported its highest ever volumes (about 10 mmscmd, up 53 per cent y-o-y), highest ever profit after tax (PAT) (₹250 crore, up 114 per cent y-o-y) and second highest ever EBITDA of ₹440 crore (+74 per cent y-o-y) despite the impact of one week of Covid-19 shutdown in Q4.
Reported EBITDA/PAT of ₹430/250 crore was impacted by Covid-related costs of about ₹16 crore. Adjusted earnings were lower than Centrum’s estimate of ₹270 crore, with higher volumes (estimated 9.7 mmscmd) being offset by lower margins of ₹7.1/₹4.9 per scm Gross/EBITDA versus estimated ₹7.5/₹5.3 per scm. FY20 adjusted EBITDA/PAT of ₹1,650/920 crore (adjusted for normalised tax rate of 25.2 per cent versus 1.2 per cent reported) grew 67.6/113 per cent y-o-y.
While FY20 results were spectacular, focus now shifts to FY21, with a weak Q1 in prospect (we expect 55 per cent volume decline to 4.1 mmscmd) but also a sharper recovery seen since Lockdown 4.0 (current volumes in June have crossed 6mmscmd), we believe FY22E will revert to strong growth over FY20 levels and remain positive. Reiterate ‘buy’, with target price of ₹315.
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