Gujarat Gas - Risk-Reward Turns Favorable: Prabhudas Lilladher
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Prabhudas Lilladher Report
Gujarat Gas Ltd.'s stock price fell 20%, as soaring spot liquefied natural gas price of over $20/ metric million British thermal unit and lower container availability hit Morbi volumes which accounts for ~60% of company’s volumes.
However, we believe recent correction offers an attractive entry point given:
likely start of new gas (Nord Stream two) pipeline supplies from Russia by early CY22 to help ease spot LNG prices,
Gujarat Gas has entered into oil linked contracts for cutting reliance on spot volumes to 24% in FY22,
recent price hikes in compressed natural gas and piped natural gas of 4%/15% to shield margins and
aggressive expansion of CNG station network to increase CNG share to 19.5% in FY24E (15.7% in FY20).
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