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Margins expand on sales optimization

Our view

The 4QFY22 reported Ebitda at Rs 6.97bn (+26% YoY; 194% QoQ), stood in-line with our estimates. The sharp sequential improvement in operating profits was driven by a) optimization and tempering of gas sales to limit dependence on expensive LNG and b) price revision undertaken in CNG and PNG-Domestic. During the quarter on one hand LNG prices continued to be high and averaged ~USD 31/mmbtu (3Q: USD 35/mmbtu) and on the other hand APM availability remained restricted, as a result GUJGA moderated sales leading to a 13% QoQ and 18% YoY drop in sales to 9.9mmscmd, in order to protect margins . As a result Ebitda/unit expanded to Rs 7.8/scm (3Q: Rs 2.27/scm), leading to stronger profitability. However moving into 1QFY23, the demand environment remains robust, with appetite for expensive gas among consumers, as result GUJGA has normalized gas sales to 10.5-11mmscmd, and has also revised the prices for Industrial consumer (by ~Rs 5/unit) , CNG (Rs 2.5/unit) and PNG-D (Rs 4/unit), to keep margins steady. We upgrade GUJGA to BUY with a TP of Rs 650/sh.

Result Highlights

▪ 4QFY22 Profitability: The operating profit and PAT for the quarter stood at Rs 6.97bn (+26%YoY; +194% QoQ) and Rs 4.46bn (+27% YoY & +265% QoQ); The profitability improved YoY & QoQ, despite weaker gas sales on account of better per unit metrics.

▪ Per unit margins: The Gross spread and EBITDA per unit stood in-line at Rs 10.7/scm (3QFY22: 4.6/scm) and Rs 7.84/scm (3QFY22: 2.27). A restriction on gas sales, helped GUJGA reduce its gas costs by 6% QoQ despite the prevailing high LNG price environment.

▪ Gas Sales: Total gas sales stood QoQ & YoY lower at 9.9mmscmd (-18% YoY; - 13% QoQ); with Industrial sales at 6.7mmsmcd (-30% YoY; -20% QoQ); CNG: 2.23mmsmcd (+30% YoY+3% QoQ) ; PNG Domestic: 0.82mmscmd (+12% YoY; +22% QoQ) and PNG commercial at 0.14mmscmd (+26% YoY; Flat QoQ). The sale in Morbi region during the quarter stood at ~5mmscmd.

▪ Infrastructure development: During the 4QFY22, GUJGA added 60 new CNG stations and 155 during the 9MFY22, including 2LCNG stations, taking the tally to a total of 711 stations. GUJGA also added 2495 kms of pipeline over FY22

▪ Customer addition: GUJGA has added approximately 154 thousand domestic consumers, 423 industrial customers, over FY22

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