CMP (NSE) 15:58, 03 Aug
Oil & Gas
Last updated on
02 Jun, 2021
Beat on earnings: GGAS reported 4QFY21 PAT of Rs3.5bn up 42% YoY, EBITDA grew by 27% YoY. In 4Q, volumes grew 22% YoY led largely by the industrial segment, where sales volumes were up 24% YoY. Morbi cluster volumes averaged at 7.3mmscmd, up 33% YoY, despite the pandemic, and remained a key driver of the volume growth. CNG sales were up 16% YoY, driven by beefing up CNG infrastructure and greater personal vehicle consumption, despite school buses, autos, taxies operating well below normal levels. Net realization rose 17% QoQ as the company raised prices for industrial customers (to pass on higher spot LNG prices) in January; ebitda/scm was Rs5.1 vs Rs4.8 YoY reflecting the benefits of gas sourcing. Repayment of debt has led to 57% YoY fall in interest outgo. Share of industrial sales were 80%, vs 79% YoY and 81% QoQ.
Valuation Metrics: Despite a strong run-up in the stock price, GGas is currently trading at 22x FY22ii, in line with its historical average. We expect the stock to double its free cash flow during Fy22ii-Fy23ii led by a strong operating performance. At a ROCE/ROE of 35%/32% in Fy22ii, we expect GGas to continue it outperformance. We recommend a Buy rating on the stock with a target of Rs 674.