MOSL: GUJARAT GAS (INITIATING COVERAGE)-Long road ahead-Abundant opportunity in long term, but short-medium term concerns to continue
​Gujarat Gas (initiating coverage): Long road ahead; Abundant opportunity in long term, but short-medium term concerns to continue
(GUJGA IN, Mkt Cap USD1.8b, CMP INR846, TP INR735, 13% Downside, Sell)
- The long-term opportunity for GUJGA is sizable, given just 18% penetration in the PNG-domestic segment and 30% penetration in the CNG segment, coupled with possible regulatory push.
- Combined pre-merger peak sales were 8-9mmscmd. Morbi, the largest industrial cluster itself has a potential of ~6mmscmd against which GUJGA is doing ~2.5mmscmd currently.
- However, 68% volume exposure to the industrial segment makes both volume and EBITDA highly volatile for GUJGA, resulting in much lower valuation multiple than Indraprastha Gas (IGL) and Mahanagar Gas (MAHGL).
- Abundant opportunity in CNG and PNG-residential segments
- Gujarat has a total addressable vehicle population of 3m, including ~71,000 buses. CNG penetration in the state is ~30%, with GUJGA catering to ~0.65m CNG vehicles. Hardly any buses run on CNG in Gujarat.
- Against an estimated 8.8m households, PNG penetration across Gujarat is ~18%, with GUJGA servicing 1.2m households.
Gujarat Gas Ltd Formerly known as Gujarat Gas Company Limited. Gujarat Gas Company Limited is an India-based company. The Company is engaged in Natural Gas Business in Gujarat. Natural gas business involves distribution of gas from sources of supply to centers of demand and to the end customers. The Company has underground pipe lines consists of mild steel (ME) and polyethylene (PE). These lines gas is supplied to Residential, Industrial, Commercial and Compressed Natural Gas (CNG). The Company also supplies piped natural gas to customers and retails compressed natural gas. Gas is used by customers for applications, such as heating, cooling, power and process. The Company has two subsidiaries namely Gujarat Gas Financial Services Limited and Gujaratgas Trading Company Limited.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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