Citi Gives Gujarat Gas Thumbs-Up On ‘Solid Growth’ Prospects
Shares of Gujarat Gas Ltd. gained as much as 1.3 percent after brokerage house Citi initiated coverage on the stock with a ‘Buy’ rating, citing solid growth prospects.
Citi expects the country’s largest city gas distributor by volume to regain some of its lost pricing power going ahead. “Our confidence stems from our global LNG oversupply view, which should keep prices muted. Assuming an 11-12 percent slope, LNG could be around 10-15 percent cheaper than fossil fuels, finally giving Gujarat Gas pricing power,” the broking firm said in a note.
The stock has underperformed the entire gas pack, since its relisting in September 2015. The reason being high industrial exposure and its customers’ ability to switch fuels, Citi said.
Citi expects the company to see material ramp up in its volumes courtesy the recently awarded 16 new geographic areas (GAs). However, it adds that the volume potential could remain under-appreciated.
Despite the buy rating, Gujarat Gas still features third on Citi’s most preferred list after Petronet LNG Ltd. and Indraprastha Gas Ltd.
The broking firm has a price target of Rs 1,141 per share, a gain of around 37 percent from Tuesday’s close.