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Gujarat Gas 4QCY2013 performance highlights and results update

February 13, 2014, Thursday, 05:31 GMT | 00:31 EST | 11:01 IST | 13:31 SGT
Contributed by Angel Broking

Gujarat Gas (GGAS) reported strong profitability for 4QCY2013 due to higher realizations and other income. We maintain our Neutral view on the stock.
Top-line up 2.3% yoy: The company’s top-line grew 2.3% yoy due to higher realizations (+20.2% yoy to Rs.33.7/scm), which although were partially offset by lower volumes (-22.0% yoy to 230mmscm).
Higher realizations boost EBITDA: The company’s realizations increased by 20.2% yoy and hence the EBITDA grew by 21.5% yoy to Rs.134cr. The company’s other income increased by 67.6% yoy to Rs.17cr and tax rate also decreased to 30.6% in 4QCY2013 compared to 31.0% in 4QCY2012. Therefore, the net profit increased by 30.6% yoy to Rs.91cr.
Outlook and valuation: The company’s volumes have declined gradually over the past one year on account of higher price of spot LNG and lower production from the KG D6 block. Moreover, given the recent government directive to diverge cheap domestic gas to CGD companies, we expect GGas’s proportion of imported RLNG (expensive) to increase which will impact volume growth of the company. At current levels, the stock is trading at inexpensive valuation of 8.7x and 8.4x CY2014E and CY2015E earnings, respectively. However, given the muted volume growth, we maintain our Neutral rating on the stock.

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