Motilal Oswal: Gujarat Gas - Quarter Led By Better Margin; Brisk Recovery In Volumes

Motilal Oswal Report

Gujarat Gas Ltd. reported better-than-expected margin of Rs 4.9/standard cubic meter (higher QoQ as well), while volumes were in line with estimate (at 4.1 million metric standard cubic meter per day (mmscmd), leading to Ebitda of Rs 1.85 billion.

The company mentioned that current sales volume stands at 9.5mmscmd (versus 9.4mmscmd of average sales in FY20), aided by strong recovery post lockdown. As per our interaction with the company, Morbi volumes are back at approximately 5.5mmscmd (versus exit rate of approximately 6.5–6.8mmscmd in FY20).

Despite lockdown, Gujarat Gas was able to add 13 new compressed natural gas (CNG) stations during the quarter and plans to add approximately 60 new CNG stations this year (of the total 100 planned outlets – which should further grow the reach of CNG in Gujarat and encourage conversions).

Covid-19-led lockdown has led to some delay in the implementation of various directives announced by the National Green Tribunal (NGT) last year.

However, a bench of the NGT recently sought an Action Taken Report (ATR) within four months to ensure a ban on the usage of pet coke and furnace oil by all states and Uniton Territories. The date for a further hearing is set as January 15, 2021.

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