Tag: Gujarat Gas

Gujarat Gas shares drop after Jefferies cuts volume estimates, price target

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Gujarat Gas” isinid=”INE844O01030″ bseid=”539336″ nseid=”GUJGASLTD” sector=”Oil Drilling And Exploration” exchange=”nse”]

Global investment banking and capital markets firm Jefferies on Thursday downgraded Gujarat Gas Ltd., one of India’s largest city gas distribution companies, to ‘underperform’.

The firm also cut the target price on the Gujarat Gas stock to Rs 400 from Rs 570 earlier, indicating a downside of more than 14 percent from its closing level on Thursday.

Reacting to the development, shares of Gujarat Gas fell as much as 5.3 percent in opening trade on Friday.

Jefferies said that the downgrade was due to the firm outlook on spot LNG prices. It sees a structural drag on Gujarat Gas’s pricing power, margin outlook, and volume growth in the medium term due to rising LNG prices.

Jefferies has cut the company’s volume estimates to 17/15 percent For the financial year 2025. It has also lowered the company’s financial year 2024-2025 estimated EBITDA by 15 percent due to lower volumes and compression in margins.

Also, Jefferies expects Gujarat Gas to post a 5 percent CAGR (compounded annual growth rate) in earnings per share (EPS) over the financial year 2022-2025.

Notably, Gujarat Gas reported a consolidated total income of Rs 4,468 crore during the September quarter, down 19.6 percent from the preceding quarter’s Rs 5,558.32 crore and up 6.8 percent in total Income of Rs 4,182 crore in the year-ago quarter. The company also reported a net profit after tax (PAT) of Rs 621.82 crore.

Shares of Gujarat Gas are trading 3.25 percent lower at Rs 451.65.

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NTPC’s power generation jumps 11% to 254 billion units in April-December 2022

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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NTPC Ltd has reported an 11.6 percent growth in power generation year-on-year during April-December period in FY 23. The state-owned company generated 295.4 billion (BU) power during the period. On a standalone basis NTPC generated 254.6 BU during April-December 2022, a 16 percent jump from the corresponding period last year, the company said in a statement.

The coal-based thermal power plants of the company utilised 73.7 percent of their capacity, a jump from 68.5 percent utilisation in the year-ago period.

Despite the positive report, NTPC’s shares slipped on Wednesday. The company’s shares were trading 1.49 percent lower at Rs 165 on BSE at 1:04pm.

NTPC commissioned the country’s first green hydrogen blending project on Tuesday. The green hydrogen blending began with the piped natural gas (PNG) network of NTPC Kawas township in Gujarat’s Surat. The project is being carried out by NTPC in a joint effort with Gujarat Gas Ltd (GGL). The first molecule of green hydrogen from the project was set in motion by P. Ram Prasad, head of the project Kawas, in presence of senior officials of both companies, NTPC said in an stock exchange filing.

The project’s foundation stone was laid by Prime Minister Narendra Modi in July last year.

This set-up will supply H2-NG (natural gas) to households in the Kawas township. Green hydrogen in Kawas is made using electrolysis of water with power from a 1 MW floating solar project.

In the initial stage, the Petroleum and Natural Gas Regulatory Board (PNGRB) has given approval for a 5 percent blending of green hydrogen with PNG. The blending level, in subsequent phases, would be scaled to reach 20 percent. Green hydrogen, when blended with natural gas, reduces CO2 emissions without impacting the net heating content.

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India’s first green hydrogen blending unit launched in Surat — details here

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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State-owned NTPC on Tuesday, January 3, said it has commissioned India’s first green hydrogen blending project. The green hydrogen blending has been started in the piped natural gas (PNG) network of NTPC Kawas township, Surat. The project is a joint effort of NTPC and Gujarat Gas Ltd (GGL).

The first molecule of green hydrogen from the project was set in motion by P. Ram Prasad, head of the project Kawas, in the presence of other senior executives of NTPC Kawas and GGL. After the start of the blending operation, NTPC Kawas held awareness workshops for township residents with help of GGL officials, the company said in an exchange filing.

NTPC and GGL have worked relentlessly towards achieving this milestone in record time after the foundation stone was laid by Prime Minister Narendra Modi on July 30, 2022.

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This set-up is geared to supply H2-NG (natural gas) to households of Kawas township at Adityanagar, Surat. Green hydrogen in Kawas is made by electrolysis of water using power from an already installed 1 MW floating solar project.

The Petroleum and Natural Gas Regulatory Board (PNGRB), the regulatory body, has given approval for a 5 percent blending of green hydrogen with PNG to start with and the blending level would be scaled phase-wise to reach 20 percent. Green hydrogen, when blended with natural gas, reduces CO2 emissions keeping the net heating content the same.

This feat is achieved only by a few select countries like the UK, Germany, and Australia, etc. This would bring India to the centre stage of the global hydrogen economy. India would not only reduce its hydrocarbon import bill significantly but can also bring forex ashore by being a green hydrogen and green chemicals exporter to the world, the company added.

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NTPC is the premier energy utility in the country with an installed capacity of 69 GW, with a diversified fuel mix. The NTPC group plans to achieve 60 GW of renewable energy (RE) in a decade and is executing several pilot projects in the green hydrogen space.

GGL is India’s largest city gas distribution (CGD) company and has a presence across 43 districts in six states and one Union Territory.

Shares of NTPC ended at Rs 167.50, down by Rs 0.50, or 0.30 percent on the BSE.

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IGL, MGL and Gujarat Gas gains as govt-appointed panel for gas pricing, seeks more time for submission of report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of city gas distribution (CGDs) companies have gained over six percent in an otherwise subdued market on the BSE intraday during Tuesday’s trading session after the government-appointed panel for gas pricing sought for more time for the submission of the report.

The government had set up a committee to review the formula for the pricing of domestically produced natural gas. “It can for all practical reasons not revise prices on October 1, citing the pendency of issues before the committee,” a source told PTI. The committee, under former planning commission member Kirit S Parikh, has been asked to suggest a “fair price to the end-consumer”, according to an order of the oil ministry.

The government sets the price of gas every six months, on April 1 and October 1, each year based on rates prevalent in gas surplus nations such as the US, Canada and Russia in one year with a lag of one quarter.

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During the past three months, these stocks have gained between 8 and 18 percent, compared to an 8 percent gain for the S&P BSE Sensex. Earlier in the year, the stock prices corrected sharply since the start of the Russia-Ukraine war as international gas prices shot up due to fears of supply disruption.

Recently global brokerage firm UBS gave a positive outlook to City Gas Distributors stocks. UBS noted that the gas companies have delivered gas costs for the second half of the July to September quarter 30 percent lower than the first half of the three-month period.

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UBS gave the shares of Indraprastha Gas a ‘buy’ rating with a target price of Rs 630 per share, meaning it expects the gas stock to jump over 48 percent from Tuesday’s closing price.

For Mahanagar Gas, UBS expects the stock to scale 48 percent from Tuesday’s closing price of Rs 868.30 to Rs 1,280. According to the brokerage both IGL and MGL have been trading at attractive valuations compared to their past 5-year average.

It, however, has a ‘sell’ call on Gujarat Gas shares and expects the stock of the gas distributor to fall to Rs 400 per share. This implies a 20 percent downside from the last closing price.

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UBS sees over 45% upside in these gas stocks on ‘attractive’ valuations and margin but…

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of gas companies Indraprastha Gas, Mahanagar Gas and Gujarat Gas were trading in the red on Wednesday, as global brokerage, UBS’ positive commentary failed to excite the Street.

Shares of Indraprastha Gas were down a percent in intraday trade even as UBS gave the stock a ‘buy’ rating with a target price of Rs 630 per share, meaning it expects the gas stock to jump over 48 percent from Tuesday’s closing price.

Mahanagar Gas shares too were trading lower, having slipped more than a percent during the day. UBS expects the stock to scale 48 percent from Tuesday’s closing price of Rs 868.30 to Rs 1,280.

According to the brokerage both IGL and MGL have been trading at attractive valuations compared to their past 5-year average.

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It, however, has a ‘sell’ call on Gujarat Gas shares, which traded in the green zone rising more than a percent. UBS, expect the stock of the gas distributor to fall to Rs 400 per share. This implies a 20 percent downside from the last closing price.

UBS noted that the gas companies have delivered gas costs for the second half of the July to September quarter 30 percent lower than the first half of the three-month period.

According to the brokerage, elevated spot LNG prices and depreciating currency have increased gas costs for the priority sector and the revision in gas allocation policy has improved the outlook for city gas distributors.

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UBS expects gross margin for the month of September as 25-40 percent higher than the April to June quarter levels.

The brokerage’s remarks and the negative trend in the gas stocks come at a time when crude jumped has more than 2 percent after Russian President Vladimir Putin announced a partial military mobilisation, escalating the war in Ukraine and raising concerns of tighter oil and gas supply.

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Govt’s move to cut CNG and PNG prices cheers IGL, MGL and Gujarat Gas investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of city gas distributors — Gujarat Gas, Mahanagar Gas and Indraprastha Gas — soared after the Central government diverted natural gas from industries to city gas operators to check the spiralling CNG and piped cooking gas prices.

At 1:59 pm shares of IGL were up by 7.8 percent from the previous close on the BSE. MGL shares were trading at Rs 858, an up of 5.58 percent. Gujarat Gas shares surged by 5.5 percent in the early morning session to Rs 479.5 per share.

According to the news agency PTI, the Ministry of Petroleum and Natural Gas amended an earlier order to increase the allocation of domestically produced gas to city gas operators.

The move follows a massive jump in CNG and PNG prices in the country in the last one year as operators used costlier imported LNG. CNG prices in Delhi went up by a massive 74 per cent (from Rs 43.40 per kg in July 2021 to Rs 75.61 per kg now) while PNG prices rose by 70 per cent (from Rs 29.66 per standard cubic meter to Rs 50.59 per scm).

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According to officials, the allocation for city gas operators such as Indraprastha Gas Ltd of Delhi and Mahanagar Gas Ltd of Mumbai has been increased to 20.78 million standard cubic meters per day.

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By increasing allocations, the country will be able to meet 94 percent of its demand for gasoline for automobiles and piped gas for cooking. In the past, about 83 percent of the demand was met by GAIL’s import of LNG.

Meanwhile, brokerage firm Jefferies has maintained a ‘buy’ rating on the shares of IGL with a target price of Rs 450. The stock has enough room to raise the price, said the brokerage house.

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Gujarat Gas shares slip by over 4% due to fall in June quarter profit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Gujarat Gas slid over 4 percent after the company reported a 19.5 percent decline in net profit for the April-June quarter. At 12:29 pm, shares of Gujarat Gas were trading at Rs 439, a decline of 4.9 percent from the previous close on the BSE.

The company’s net profit for the April-June quarter stood at Rs 381.9 crore as compared to Rs 474 crore in the corresponding period last year.  The net revenue, however, grew by 72 percent and stood at Rs 5,322 crore.

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The earnings before interest, taxes, depreciation and amortisation (EBITDA) — a measure of a company’s financial performance — for the quarter ended June stood at Rs 625.61 crore, down 15.93 percent from the corresponding period last year.

What do analysts say?

Brokerage firm CLSA has maintained the ‘sell’ rating on the shares of Gujarat Gas. The firm has cut down the target price from Rs 450 per share to  Rs 390 per share.  It has also cut the earnings per share estimates for FY23/24 by 20 percent/12 percent.

“The company has missed the estimates in its quarterly earnings. There has been  an 8 percent miss on net profit due to lower margin and volume
and a 2 percent miss in achieving the target volume due to industrial and residential business,” the brokerage firm said.

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Meanwhile, Jefferies has maintained a ‘buy’ rating on the shares of Gujarat Gas with a revised target price of Rs 700.

The brokerage house said volume missed the estimate and the FY23 outlook is clouded too.

Market expert Deven Choksey of KRChoksey said: “Till the time, we see some good news on the gas prices, the input cost for the distribution companies, I would think that they’ll continue to struggle. This particular quarter looks really challenging unless there is some meaningful decline in the international gas prices. But till then the results could be more on the pressure side as far as the margin is concerned.”

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India’s largest tile manufacturing hub shuts for a month citing weak demand

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Gujarat’s Morbi ceramic cluster, India’s largest tile manufacturing hub, will be closed for a month starting August following a demand slowdown, Morbi Association has said.

Demand has dropped domestically as well as in export markets. However, sources have told CNBC-TV18 that the shutdown is also likely because of high gas prices and inadequate working capital.

Shares of Gujarat Gas were in focus on Wednesday as the natural gas distribution company’s sales are likely to be affected next month due to the shutdown of the Morbi cluster, which accounts for 50 percent of Gujarat Gas’ PNG demand.

Prices of spot LNG, which contribute to around 30 percent of total sourcing for Gujarat Gas, are also up to around $35 per MMBtu, which compares to the average prices in the calendar year 2022 at around $19 per barrel.

Gujarat Gas, is facing a double whammy as its volumes are going down and at the same time gas prices are going up.

Gujarat Gas’ stock has declined around 27 percent in 2022 (year-to-date).

Earlier this month, Nirmal Bang in a note pointed out for every 5 percent rise in gas costs impacts the gas company’s earnings by around 32.4 percent. “For the ceramic industry, while we do expect growth in volume to continue in 1QFY23, we expect the sharp increase in natural gas and other RM prices to lead to pressure on operating margins,” it said on July 7.

The brokerage had given a buy rating to tiles firm Kajaria Ceramics with a target price of Rs 1,129.

It expects the company’s EBITDA margin, a key measure of profitability determining a company’s profit as a percentage of its sales before the implications of components such as taxes, to decline to 14.2 percent in the April to June 2022 period. This compares to the EBITDA margin of 14.3 the corresponding quarter of the previous fiscal and 15.1 percent in the last quarter.

According to Nirmal Bang, the decline in EBITDA margins is due to a sharp increase in gas prices (from Rs36.1/scm in 4QFY22 to Rs40.06/scm in 1QFY23), freight costs and zirconium cost.

Net profit is expected to increase by 132 percent on a year-on-year basis but it will decline by a little more than a percent to Rs 962 million when compared with the previous quarter, the brokerage said.

It, however, added that consolidation of unorganised players in Morbi and expansion by Kajaria in tier 2/3 cities should help it to increase market share gradually (from the current level of 10%) in the medium term.

Meanwhile, in June, domestic brokerage firm PhillipCapital organised a tiles industry visit to Ahmedabad and Morbi, following which it said prices would soften or remain static in the near term, as weakness in exports is leading to volumes shifting to the domestic market.

Meanwhile, the domestic market industry is seeing softness in retail volumes and in Morbi, there is an increase in working capital due to pushing of inventory (to 90-120 days from 75 days), it said.

PhillipCapital added that Morbi players will shift to LPG/propane from natural gas, mainly because of price arbitrage. They (tile companies in Morbi) have not added much new capacity as their return ratios have narrowed and payback periods have increased (major capacity addition in premium tiles). Smaller players are seeing cost pressure, resulting in shutdowns, the brokerage said.

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Gujarat Gas stock hits new 52-week low as Credit Suisse sees margin moderating

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Gujarat Gas slumped around 4 percent after Credit Suisse said that the margin expectations are still high and that it sees more downside.

At 14:24 IST, shares of the gas company were trading 2.6 percent lower at Rs 412.65 on the BSE. The stock hit a new 52-week low at Rs 405.65 on Friday, June 17. The stock has been falling for the past two days and has slumped over 8 percent during the period.

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The brokerage firm has maintained its ‘underperform’ rating on company shares with a target price of Rs 380.

Credit Suisse believes that the company is still pricing in 10 percent compound annual growth rate in volume for 10 years and margin expansion.

The compressed natural gas margin should moderate with increasing blending and a sharp surge in spot gas, while the overall margin of Gujarat Gas could moderate in the second half as Morbi volumes return and CNG input cost rises, as per the foreign brokerage firm.

Morbi is a mid-sized city in Gujarat known for its contribution to the global ceramic sector and used a bulk of gas to manufacture tiles.

Earlier this month, UBS cut its target price on the stock from Rs 550 to Rs 400 per share. The brokerage house believes that manufacturers are opting for propane versus the gas supplied by the company, which could impact the company’s volume and margin going ahead.

However, ICICI Securities remained confident about the stock. According to the firm, Morbi propane worries are overblown. It was of the view that there are limited downside risks to the stock.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow