Gujarat Gas Q2 Results Review - Competitive Intensity Picks Up: Prabhudas Lilladher

Prabhudas Lilladher Report

Gujarat Gas Ltd. reported better than expected Q2 results with Ebitda/profit after tax of Rs 6.4 billion (up 6% QoQ; our estimate: Rs 4.9 billion) and Rs 4.0 billion (up 6.1% QoQ; our estimate: Rs 3.0 billion) due to sharp improvement in margins.

Q2 industrial volumes were down to 4.5 million metric standard cubic meter per day (down 32% QoQ), as demand shifted to cheaper Propane which amounted to 2.5 mmscmd.

Drop in spot liquefied natural gas prices to $24/metric million British thermal unit is positive, however, emergence of propane as a competing fuel will limit Gujarat Gas’ margins/volume growth.

The company has cut prices by Rs 5/standard cubic meter recently to pass on drop in gas prices, however, Gujarat Gas is likely to face growth challenges.

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