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Beat on EBITDA & PAT as strong margin offsets volume weakness

* In 2QFY25, Gujrat Gas (GUJGA) reported EBITDA and PAT at 10%/17% above our estimates. The overall volume was down 4% vs our estimate, though this was offset by the EBITDA/scm margin coming in at INR6.4 (our est: INR5.6). The beat at the EBITDA level appears to be largely driven by gas cost optimization, as gross margin expanded from INR8.6/scm in 1QFY25 to INR10.4/scm in 2QFY25. In 3QFY25, we expect a sharp recovery in volumes QoQ as 2Q volumes were impacted by a shutdown in Morbi.

* EBITDA stood at INR5.1b (est. of INR4.7b, up 4% YoY) and standalone PAT stood at INR3.1b (est. of INR2.6b, up 3% YoY). The sharp variance at the PAT level was a function of depreciation coming in below our estimates.

* Overall volumes in 2QFY25 came at 8.8mmscmd, missing our estimates by 4%. However, EBITDA/scm came at INR6.4 (vs. our est. of INR5.6, up 19% QoQ).

* CNG volumes were at 2.9mmscmd (+12% YoY), in line with 2QFY24.

* PNG I/C volumes decreased to 5.1mmscmd (our est. 5.4mmscmd, -16% YoY).

* PNG domestic volumes stood at 0.8mmscmd (our est. 0.6mmscmd, +9% YoY).

* The company has added more than ~38.5k new domestic customers and nine new CNG stations.

* As of 30th Sept’24, the company secured a signed volume of approximately 527,000scmd, set to be commissioned in the coming months.

* In 1HY25, PAT increased to INR6.4b (+24% YoY).

* The earnings call is scheduled for 7th Nov’24 at 5:30pm.

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