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ICICI Securities Report
There has been a surprising lack of traction in liquefied natural gas prices at the onset of the European winter, with the high levels of inventory and warm temperatures across Europe dragging prices.
Additionally, demand across India and China has weakened considerably due to the persistent high prices across Asia and the Covid lockdown till recently in China.
Overall, the next six-nine months do seem positive for Indian gas players, with lower than estimated prices for both domestic and imported gas to help keep prices at manageable levels.
Nevertheless, we remain wary of extrapolating these price trends through to FY24E-FY25E given the likelihood of rebound in Chinese demand, renewed inventory build-up in Europe and relatively limited growth in global LNG exports over the next two years.
We therefore continue to assume average LNG prices at $25-28/metric million British Thermal unit for FY24E.
In this scenario, we see margins for city gas distributions remaining strong over FY24E, helped by lower domestic gas prices and moderate LNG prices.
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