Gujarat Gas Stock Rallies Most On Record After Q3 Results

Shares of Gujarat Gas Ltd. gained the most on record as volumes surged and margins expanded in the third quarter.

Revenue of the city gas distributor rose 13% over the year earlier to Rs 2,829.4 crore in the three months ended December, according to an exchange filing. That compares with the Rs 2,663.9-crore consensus estimate of analysts tracked by Bloomberg.

• Its net profit nearly doubled to Rs 392.1 crore, against the projected Rs 291.9 crore.

• Operating profit or Ebitda was up 66% to Rs 614.7 crore, compare with the Rs 436.2-crore estimate.

• Margin expanded to 21.7% from 14.8% a year ago, owing to lower-than-expected gas cost.

The company reported a 23% volume growth during the quarter, driven by a 29% increase in industrial volumes.

“Morbi cluster accounted for bulk of the increase as volumes moved higher to 7 mmscmd from 5.8 mmscmd,” Nomura said in a note. “As spot LNG prices moderate, Gujarat Gas expects overall volumes to increase further to over 12 mmscmd by the end of March.”

The company’s total gas volume of 11.5 mmscmd is higher than the FY20 average of 9.44 mmscmd, it said in the filing.

Still, Ambit Capital said this record quarter doesn’t change the fact that Gujarat Gas remains susceptible to spot price vagaries. “Given its industrial skew and lower prices of alternate fuels, we believe its pricing power is limited,” the brokerage said in a post-earnings note.

Ambit Capital raised its medium-term Ebitda estimate for Gujarat Gas by only 4% as it expects the trend to start reversing by the fourth quarter of FY21.

Shares of Gujarat Gas gained as much as 14.2% in early trade on Monday to Rs 434 apiece — also a lifetime high. Of the 33 analysts tracking the company, 26 have a ‘buy’ rating, four suggest a ‘hold’ and three recommend a ‘sell’. The stock crossed its Bloomberg consensus 12-month price target of Rs 424.5 on Monday.