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Gujarat Gas (GGAS) - Qtr. Update - Dtd. - February 22, 2013




Axis Capital Limited


24 Feb 2013





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Gujarat Gas’ (GGAS’) Q4CY12 performance was in line with our estimates. PAT at Rs 701 mn declined 30% QoQ due to weak gas sales volume (down 8% QoQ) and higher gas costs. Volume was impacted due to lower off-take from price-sensitive industrial consumers, and seasonality. Gross margin declined 7% QoQ to Rs 5.9/scm due to higher proportion of costlier LNG in gas sourcing mix. GGAS’ volumes would remain muted over next 2-3 quarters due to (a) industrial users shifting to grid power due to cost advantage and (b) ~10% drop in industrial utilization due to economic slowdown. Also, rising proportion of costlier RLNG in gas sourcing mix due to lower domestic gas supplies will continue to exert pressure on GGAS margins. Success rate of open offer and strategy of new promoter (GSPC) would be key parameters to watch for. Maintain HOLD with TP of Rs 320, which implies 10% upside from CMP of Rs 290. At CMP, the stock trades at 14x CY13E EPS of Rs 20.6 and 15x CY14E EPS of Rs 19.6. Key Assumptions: Crude at USD 110/ bbl for FY14 and USD 90/ bbl for FY15. INR/USD at 53 for FY14 and 51.4 for FY15. Regards, Amit Mishra, CFA (Sr VP – Energy) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1142 Prashant Tarwadi (AVP – Energy) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1113

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