Gujarat Gas Q3 Results Review

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Gujarat Gas Ltd. reported better than expected Q3 results with Ebitda and profit after tax of Rs 5.8 billion (-9% QoQ; our estimate: Rs 3.6 billion) and Rs 3.7 billion (-8.1% QoQ; our estimate: Rs 1.9 billion), led by higher than expected margins.

Q3 industrial volumes were down to 4.1 million metric standard cubic metre per day (from Q4 FY21 peak of 9.6), as demand shifted to cheaper Propane of ~2.5 mmscmd.

Further, drop in spot liquefied natural gas prices to ~$20/metric millon British thermal unit is positive and has helped the company reduce industrial gas prices by Rs 7/standard cubic metre to Rs 46 in Jan-23.

However, propane prices need to be watched because they may emerge as significant competition in future. We like Gujarat Gas business model given strong downstream demand across ceramics, agrochemicals and pharma sector accompanied by compressed natural gas which will be a strong growth driver.

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