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Our view

GUJGA’s reported revenue ar Rs 37.8bn (-27% YoY; -4% QoQ), attributed greatly to reduced selling price, Ebitda at Rs 3.8bn (-36% YoY; -31% QoQ); Gas sales at 9.22mmscmd (-5% YoY; +4% QoQ) Gas costs of USD 12.42mmbtu, margins contracted during the quarter due to low propane prices. Gas sales recovered in Morbi, as Gujarat government cut VAT on CNG and D-PNG from 15% to 5% & increase in custom duties on propane from 2.75% to 19%, making it level playing field for GGL. Propane prices are low during summers and increase thereafter, Aramco increased propane price by USD 70/ton. Invested Rs 1bn in GSPC LNG Limited as strategic investment as LNG terminal would serve for long term goals of GGL. Progressing in Rajasthan with new areas of Sirohi, Jalore & Dungarpur primarily CNG market, along with Abu Road having industrial clusters and connecting towards Pali & Udaipur on Delhi-Mumbai Highway. Thane rural region crossing 0.1mn kg of CNG and 0.5mmscmd of Industrial. Capex guidance of Rs 10bn p.a. for next 3 years towards new and existing GAs and a third towards CNG network. Thane Rural GA, Ahmedabad rural GA, Rajasthan, Punjab & Haryana to steam growth.. We maintain our ADD rating.

Result Highlights

? Revenue: The revenue for the 1QFY24 stood at Rs 37.8bn (-27% YoY; -4% QoQ). The YoY revenue decline during the quarter was on account of YoY lower sales volume and lower selling price. Soft spot LNG prices led to increase in industrial volumes sold to 5.88mmscmd.

* Profitability: The operating profit and PAT for the quarter stood at Rs 3.8bn (- 36%YoY; -31% QoQ) and Rs 2.1bn (-44% YoY & -42% QoQ), pressure from alternate fuels led to contraction of margins

* Per unit margins: The Gross spread and EBITDA per unit stood at Rs 8.2/scm (4QFY23: 10.6/scm) and Rs 4.6/scm (4QFY23: 7.03).

* Gas Sales: Total gas sales stood QoQ higher but YoY lower at 9.22mmscmd (-5% YoY; +4% QoQ); with Industrial sales at 5.88mmsmcd (-11% YoY; +10% QoQ); CNG: 2.61mmsmcd (+7% YoY; +3% QoQ); PNG Domestic: 0.6mmscmd (+9% YoY; -28% QoQ) and PNG commercial at 0.13mmscmd (Flat YoY; -7% QoQ).

* Sales at Morbi: The gas sales in Morbi recovered to 4.01mmscmd from 3.5mmscmd in 4QFY23 led by cut in VAT on CNG and increase of custom duties on propane

* Operational Update During the quarter, GUJGA connected over 46,000 new domestic customers and commissioned 36 commercial & industrial customers. 0.1mmscmd sales in Thane rural GA

  Valuation

  We value GUJGA at Rs 540/sh (Mar’24) on DCF basis, were we estimate an earnings CAGR of ~14% (FY23-30e) backed by a volume growth of ~13% CAGR (FY23 -30e).

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