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ICICI Securities Report
We met with the senior management team of Gujarat Gas Ltd. for an update on recent business developments and future outlook. Key takeaways:
Volumes in Q2 FY23 look discernibly constrained, with the combined impact of high input costs, logistical issues, propane pricing discount to gas, and the ~one-month shutdown at the Morbi ceramic cluster. This implies overall volumes in Q2 FY23 would likely trend at ~7.6 million metric standard cubic meter per day versus the 9.8 mmscmd in Q1.
While Q2 and even Q3 FY23E margins may remain stronger than historical levels owing to limited spot liquefied natural gas requirements, hence lower gas costs, we are cautious on prospects for the full year.
Our caution is due to: the potential for return of Morbi volumes, high domestic plus compressed natural gas costs, and uncertain ‘propane to gas’ economics, which would drive margins lower.
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