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Ease in propane supply to drag Morbi volumes lower

GEL reported a beat on EBITDA at INR13.0bn, largely driven by strong performance from its Trading business. EBITDA from the CGD business stood at INR5.8bn, up 25.2/7.0% QoQ/YoY. Total CGD volumes grew 39.1% QoQ/YoY to 12.3mmscmd in Q1FY27, driven by strong PNG-I/C volumes and growth in CNG volumes, partly offset by muted PNG-D volumes. Management indicated that higher propane availability, following diversification of supply sources beyond the Middle East, has impacted Morbi volumes, which are currently trending at ~3mmscmd, down from the ~8mmscmd runrate witnessed in May-June’26. Consequently, we lower our volume estimates to 10.4/9.9mmscmd from 12.1/10.7mmscmd for FY27/FY28E. Management maintained its CGD EBITDA/scm guidance of INR5.5-6.5/scm; we estimate EBITDA/scm at INR5.3/5.7/scm for FY27/FY28E. GEL maintained its INR11-12bn EBIT guidance for the Trading business, with margins of 4-5%; we have factored in our estimates accordingly. We value the company on SOTP basis, assigning 10x EV/EBITDA to the CGD business and 4x to Gas Trading/E&P/Power, arriving at a target price of INR275 (earlier: INR293). Maintain “Hold”.

Trading business drives EBITDA beat :

GEL reported a beat on EBITDA at INR13.0bn (PLe: INR9.5bn, BBGe: INR8.9bn), up 68.1% QoQ and 65.5% YoY led by strong profitability in the Trading business. Trading EBITDA improved to INR7.3bn, 2x YoY. EBITDA from the CGD business stood at INR5.8bn, up 25.2/7.0% QoQ/YoY. EBITDA from E&P declined sharply by 78.6%/57.1% QoQ/YoY to INR30mn, while Power EBITDA stood at INR180mn, up 2x QoQ.

CGD volumes improve QoQ and YoY led by industrial vol:

Total CGD sales volume increased 39.1% QoQ/YoY to 12.3mmscmd in Q1FY27, driven by 80.7%/62.5% QoQ/YoY growth in PNG-I/C volumes to 7.9mmscmd and 4.4%/12.9% QoQ/YoY growth in CNG volumes to 3.8mmscmd. PNG-D volumes remained muted, growing 1.4% YoY while declining 23.1% QoQ to 0.7mmscmd.

Gas Trading Business:

GEL imported 10 LNG cargoes in Q1FY27, flat QoQ and up from 6 in Q1FY26. Trading volumes increased to 12.2mmscmd, from 10.2mmscmd in Q4FY26 and 9.3mmscmd in Q1FY26. Of the 12.2mmscmd, 8.9mmscmd was supplied to the internal CGD business, while the remaining 3.3mmscmd was sold externally. External sales volume in FY26 stood at 4.9mmscmd.

Oil and gas volumes on a declining trend:

Oil production declined to 336bopd in Q1FY27 vs 335bopd in Q4FY26 and 412bopd in Q1FY26. Gas production declined to 23,000scmd vs 28,000/30,000scmd in Q4FY26/Q1FY26.

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