MOSL: GUJARAT GAS (Buy)-EBITDA above estimate led by better volumes and EBITDA/scm

Gujarat Gas: EBITDA above estimate led by better volumes and EBITDA/scm

(GUJGA IN, Mkt Cap USD1.9b, CMP INR843, TP INR1122, 33% Upside, Buy)

• GUJGA reported EBITDA of INR2.2b (+52% YoY, +11% QoQ), slightly above our estimate of INR2.1b, led by better-than-expected volumes and margins. PAT of INR660m (+99% YoY, +10% QoQ) came in lower than our estimate of INR713m due to a higher tax rate of 43.4% v/s 34.4% in 3QFY18 and 20.2% in 4QFY17. For FY18, EBITDA grew by 20% YoY to INR8.9b and PAT by 32% YoY to INR2.9b.
• Strong PNG household volumes: PNG industrial/commercial volumes grew 9% YoY (+4% QoQ) to 4.7mmscmd, while PNG household volumes rose 30% YoY (+38% QoQ) to 0.7mmscmd. For FY18, PNG industrial/commercial volumes grew 17% YoY to 4.4mmscmd and PNG household volumes rose 15% YoY to 0.5mmscmd.
• CNG volumes up 10% YoY: CNG volumes stood at 1.4mmscmd (+10% YoY, +5% QoQ) in 4QFY18. For FY18, CNG volumes grew 10% YoY to 1.3mmscmd. Unless CNG volumes become a larger contributor, the company would continue witnessing volatility in volumes and margins, in our view.
• EBITDA/scm at INR3.7: EBITDA/scm rose 37% YoY (+6% QoQ) to INR3.7 (above our estimate of INR3.6) in 4QFY18 and 3% YoY to INR4.0 in FY18.