Tag: Gujarat Gas

Planning to invest in gas firms? Five reasons that will trigger sharp rallies in these stocks this year

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

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In the Union Budget 2020, the central government announced several reforms in the oil and gas sector including an increase in petroleum subsidies and expansion in the gas grid. The reforms are expected to give a fresh fillip to gas transmission companies and city gas distributors.

One of the key reforms for the gas space this year was the government proposing to expand the gas pipeline network from 16,200 km to 27,000 km. This would hugely benefit stocks such as GAIL, Gujarat Gas, Indraprastha Gas, and Mahanagar Gas Ltd.

Other key triggers for the oil transmission space this year are the inclusion of gas in GST, a 50 percent cut in domestic gas prices and a change in unified tariff regime. Further reforms on gas space will be undertaken to facilitate transparent price discovery and ease of transactions.

In the last one year, all gas transmission stocks reported a good rally. Gujarat Gas climbed the most, by 145 percent followed by IGL (+85 percent), Adani Gas (+72 percent) and MGL (+37 percent).

Along with the rally in share prices, the gas transmission stocks have quite evidently also performed well in their earnings too. Except for GAIL, IGL in its Q3 earnings reported a 43 percent jump in its third-quarter net profit on the rise in gas sales volumes. Mahanagar Gas also posted net profit growth of 25 percent YoY. Adani Gas saw its profit doubling to Rs 114 crore on account of higher demand for CNG and PNG.

Meanwhile, India’s gas consumption rose 5 percent YoY in November 2019. Benign gas consumption trends suggest QoQ volume declines for GAIL. YoY demand growth for city gas (IGL/MGL/Gujarat Gas) remains healthy for Q3FY20, said CLSA.

While, Motilal Oswal in its report said, “Since the expansion plan of the gas grid is long-awaited, its roadmap remains unclear. Also, transparent pricing is necessary for higher utilisation of the gas grid. PNGRB is already working on developing a national gas trading exchange.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

Drop in raw material prices to give a fillip to city gas distribution firms, says CLSA

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

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The city gas distribution (CGD) companies are likely to benefit from a slew of positive reforms and falling raw material prices in the year 2020.

According to CLSA, CGD stocks such as Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL) and Gujarat Gas are well-placed to gain from a decline in raw material prices, a slew of reform-linked tailwinds and rising competing fuel price.

The global brokerage reiterated ‘Buy’ rating on the stocks and raised its target price (TP).

CLSA raised Gujarat Gas EPS by 7-9 percent and target price to Rs 315 from Rs 270 earlier.

“Gujarat Gas is a play on tighter environment norms against the use of polluting fuels in small factories, even as soft LNG price remains a tailwind for the stock,” CLSA said in a report.

It raised TP for IGL to Rs 540 from Rs 510 and for MGL to Rs 1,425 from Rs 1,380 earlier.

“An approximately 23 percent fall in domestic gas price in April 2020 after the 12.5 percent cut in October 2019 will bring down raw material cost and boost volumes/margins. Inclusion of gas in GST, added push on CNG vehicles after BSVI adoption in April 2020, further tightening of norms against polluting fuels, and tax benefit on CNG vehicles are other possible tailwinds,” CLSA said.

The brokerage expects MGL’s infra exclusivity in Mumbai to be extended after it expires in 2020, which may remove a big overhang.

“MGL has the best risk-reward, IGL has the most consistent growth in the space, and Gujarat Gas is a play on weak LNG prices,” CLSA said.

Moreover, more than 15 percent rise in Brent crude price in the past three months on bigger cuts by Opec may drive up prices of competing fuels such as diesel and petrol.

This combination of falling raw material costs and rising competing fuel prices will further raise the discount of CNG/PNG to competing fuels, which will support volume growth as well as give room for additional margin expansion in 2020, the report added.

Continued depressed LNG prices could be another tailwind to support growth in the industrial and commercial sectors.

Further, the gas sector may see game-changing reforms in 2020. Being key gas consumers, city gas companies outside Gujarat may see big gains from the inclusion of gas in GST.

Any further action to curb the use of polluting fuels, as recommended by the National Green Tribunal, could be positive for CGD players such as Gujarat Gas, CLSA said.

There has been a demand to bring down the GST rate of CNG vehicles in-line with Electric Vehicles, i.e to 5 percent from 28 percent. If accepted, this would be a big positive for CNG demand.

Additionally, the 25-year period of infrastructure exclusivity for MGL’s Mumbai (GA-1) licence expires in May 2020. CLSA expects this exclusivity may be extended by 10 years, which could allay a big investor concern for MGL.

“This should also be taken as a positive read-through for IGL, which will see its 25-year infrastructure exclusivity in Delhi expire in 2023,” CLSA said.

High volume growth and weak LNG price should start a virtuous cycle for Gujarat Gas as higher industrial volume increases mix of cheaper spot LNG, which will bring down the unit raw material cost. This should attract more volumes and boost margins.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

Why Gujarat Gas stock is under pressure

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

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Gujarat Gas saw a blowout first quarter with record-high volumes driven by the Morbi area but the stock has been under pressure lately. In the June quarter,  the industrial volumes were higher because of a ban from the National Green Tribunal on coal gasifiers. Shares of Gujarat Gas traded nearly 4 percent down on Wednesday.

Industrial volumes touched the highs of 6.3 mmscmd in June-July 2019 but now they have come down to 4.4 mmscmd on back of demand slowdown, higher rains and some shutdowns. Gujarat Gas management confirmed this to CNBC-TV18.

The export market for Morbi is also not doing well. Around 30 percent of the total production from Morbi is exported and 70 percent of the total exports is to Middle-Eastern area where demand has been tapering.

Another problem at Morbi area has been in terms of usage of propane instead of PNG as input and the propane prices are Rs 5/scm lower than that of the natural gas. Therefore the Morbi producers prefer using propane than PNG as an input. Moreover, going forward as well propane prices are expected to remain lower and installations are expected to double.

The current propane consumption which stands at 0.5 mmscmd is expected to double in the next 6-9 months if the prices remain low.

The stock has already run up 25-30 percent this year and trades at 19 times FY21 EPS, which is not cheap and now with the above developments, the stock has been down in trade.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

How city gas distribution companies fared in Q1FY20

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

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After the dismal performance in the December quarter, the first quarter of the financial year 2019-20 took some breather and city gas distribution (CGD) companies reported good earnings in the quarter. The three CGD companies—Gujarat Gas,  Mahanagar Gas and Indraprastha Gas—largely met or beat street estimates in the June quarter.

The common theme in the Q1FY20 has been margin expansion for all the three companies. For Gujarat Gas, EBITDA per unit expanded substantially to Rs 5.6, a rise of 33 percent year-over-year and up 30 percent quarter-over-quarter.

It was a similar story for Mahanagar Gas, which saw an increase of 24 percent YoY and 28 percent QoQ at Rs10.1, reporting record-high margins.

However, the expansion in margins was not so high for Indraprastha Gas as reported by other companies.  IGL saw a 5 percent QoQ and YoY increase in EBITDA per unit at Rs 6.2.

Moving on the volumes, Gujarat Gas was a complete outlier here, posted record-high volumes due to an increase in industrial volumes at Morbi. Overall volumes were up 44 percent QoQ and YoY for the company at 9.2 mmscmd.

IGL saw steady growth of 14.5 percent YoY and flat growth in QoQ led by growth across segments. The YoY growth was good despite a strong base, and brokerages expect the company to continue to deliver double-digit growth.

However, MGL lagged when it came to volume growth. It saw a 1 percent decline QoQ and a mere 2 percent increase YoY, indicating that the margin expansion was not driven by volume growth but due to lower costs. Most brokerages were not enthused by MGL’s margin expansion due to the volume decline.

But IGL continues to trade at a premium to the other companies and remained a top pick for a lot of brokerages in the sector. The stock is up 21 percent YTD indicating that Street is pricing in the steady performance.

Gujarat Gas, on the other hand, has been on a run after the positive NGT order, and has risen 38 percent YTD and trades at 19X FY20 EPS.

MGL continues to lag and trades at a sharp discount to IGL and Gujarat Gas and trades at 12.6X FY20 EPS.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

Top brokerage calls for Friday: Kotak downgrades Maruti Suzuki, DB positive on UPL, Gujarat Gas

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

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Indian shares are likely to remain negative following Asian markets, which shuddered lower on Friday after the European Central Bank slashed its growth forecasts, leaving investors fearing the worst for the global economy.

On Wednesday, the Nifty50 closed at 11,058, up 5 points, and the BSE Sensex climbed 89 points to close at 36,725.

Kotak Institutional Equities downgraded Maruti Suzuki and cut its target to Rs 7,500 from Rs 7,600. Meanwhile, Nomura maintained a neutral call for ALkem Labs but cut its target price. Deutsche Bank, however, was positive on UPL and Gujarat Gas.

Here are the top brokerage calls for today:

Kotak Institutional Equities on Maruti Suzuki

– Downgraded to add from buy, target cut to Rs 7,500 From Rs 7,600 per share

– Domestic passenger vehicle industry is likely to grow in low single-digit

– Expect the company to gain market share, but cut its earnings per share (EPS) estimates by 4-9 percent for FY19-21

– Company to gain 290 bps market share over the next four years

Nomura on Alkem Labs

– Remain neutral call, target cut to Rs 1,965 From Rs 2,116 per share

– Factoring in impact Of competition in drug Mycophenolate Mofetil Suspension (MMS)

– MMS will likely contribute 16 percent to company’s US revenues and 29 percent to net earnings in FY19

– Factoring in 52 percent and 20 percent decline in MMS sales for the company in FY20 & FY21, respectively

– MMS’ profitability is substantial, impact on net earnings is higher

Deutsche Bank on UPL

– Buy rating, target at Rs 970 from Rs 850 per share

– Valuation looks reasonable for FY21 estimate price to earnings ratio Of 12.8x

– Factor in 40 percent of the announced cost synergies Of $230 million from FY21 onwards

– Increase in FY21 estimate earnings per share is however only 2 percent

– Factor in likely restructuring costs in near-term to achieve guided synergy benefits

Deutsche Bank on Gujarat Gas

– Buy rating, target at Rs 160 per share

– NGT orders ceramic units in Morbi to shift to natural gas

– Company the primary beneficiary, Petronet LNG to benefit too

– More Action against air pollution favors natural gas consumption

– Every 1 mmscmd additional gas sales volume leads to a 20 percent increase in company’s earnings

Deutsche Bank on ICICI Prudential Life

– Buy Rating, target at Rs 440 per share

– Growth trajectory strengthening, risk-reward favourable

– February was the second successive month of double-digit growth with annual premium equivalent growing at 14.5 percent year-on-year.

– FY20 to benefit from a low base; equity sentiment uptick as also a growth positive

– Margin expansion should continue

Macquarie on ABB

– PowerGrid business is to be vertically demerged into a separate company and subsequently listed

– Weak sector outlook will struggle to get the current lofty valuations

– The demerger would be incrementally negative as discovered valuations are likely to be lower

– Underperform rating, target cut to Rs 812 from Rs 967 per share

– Cut earnings estimates for next two years by 48-52 percent, primarily due to demerger

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

Gujarat Gas surges after NGT orders to shut coal-operated ceramic units in Gujarat

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

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Shares of city gas distribution company Gujarat Gas Ltd rallied in trade after the National Green Tribunal (NGT) Delhi ordered to shut all coal-operated units of ceramic companies in Morbi, Gujarat. The ceramic companies have been asked to either shift to gas or shut all units. The news was positive for Gujarat Gas as the company is the sole supplier of natural gas in the region.

Gujarat Gas shares rose as much as 7.31 percent intraday to Rs 130.30 per share on the NSE. At 12.24 PM, the stock traded at Rs 129.80 per share, up 5.02 percent from its previous close.

Currently, the ceramic units at Morbi consume around 2.5mmscmd of gas (~50% of total units operate on gas). Earlier, the number was as high as 4mmscmd, but this was reduced as companies switched to low-cost coal gasifiers.

The new ruling will make the volumes shift back to Gujarat Gas’ portfolio. Even if 50 percent of the lost volumes are routed back to Gujarat Gas, it would mean a 13 percent impact on FY20EPS of the company.

IDFC Securities says, “An addition of 0.7mmscmd of volumes will add 14% to Industrial segment and 10% to overall volumes for the year for the company.”

However, the ceramic industry has indicated that they will appeal against the order, and thus, the timeline of the execution of this order will be closely watched.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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