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Morbi volumes remain under pressure.

GUJENERG reported standalone EBITDA of INR8.0bn, down by 38.5% QoQ due to weaker Trading business margins and lower Morbi volumes but improved 24.0% YoY. EBITDA from the Trading business stood at INR3.3bn, down 54.9% QoQ, while CGD EBITDA declined 20.4% QoQ to INR4.6bn. Total CGD volumes declined 13.3% QoQ to 10.7mmscmd, as Morbi volumes normalized to 3.8mmscmd (PLe: 2.8mmscmd) from 5.7mmscmd amid increased LPG availability and seasonality monsoon impact in CNG. As per management, Morbi volumes are currently trending at ~1mmscmd. We maintain our FY27E volume estimate at 10.4mmscmd, supported by strong 1HFY27 performance. We lower our FY28E volume estimate to 9.7mmscmd (previously: 9.9mmscmd) and expect volumes to reach 10.1mmscmd in FY29E. Management has lowered its CGD EBITDA/scm guidance range to INR5-6/scm from INR5.5-6.5/scm. Accordingly, we lower our EBITDA/scm estimates to INR4.7/5.3/5.6/scm for FY27/28/29E (previous FY27/FY28: INR5.3/5.7/scm). Management maintained its Trading business margin of 4-5%, which we have factored into our estimates. We value the company on SOTP basis using Sep’28E estimates, assigning 8x EV/EBITDA to the CGD business and 4x to the Gas Trading/E&P/Power businesses (all multiples unchanged), arriving at a revised TP of INR228 (previously: INR239). Maintain Hold.

EBITDA declines QoQ as Trading gains normalize, but improve YoY:

Company reported standalone EBITDA of INR8.0bn (PLe: INR6.8bn; BBGe: INR8.0bn), declining 38.5% QoQ but increasing 24.0% YoY. The YoY growth was driven by improved profitability in the E&P and Gas Trading businesses. Trading EBITDA increased 89.7% YoY to INR3.3bn, while E&P EBITDA stood at INR0.2bn vs INR60mn YoY . Power EBITDA stood at INR0.2bn, down 12% YoY, while CGD EBITDA declined 2.3% YoY. On a QoQ basis, Gas Trading EBITDA declined 54.9% due to normalization of trading gains. CGD EBITDA declined 20.4% QoQ, primarily due to normalization of Morbi volumes following increased propane availability.

CGD volumes decline QoQ on Morbi normalization:

Total CGD sales volumes declined 13.3% QoQ to 10.7mmscmd in Q2FY27, primarily driven by a 20.1% QoQ decline in PNG-I/C volumes to 6.3mmscmd, following the normalization of elevated demand from the Morbi ceramic cluster. Morbi volumes declined to 3.8mmscmd from 5.7mmscmd QoQ, with the current run rate at ~1mmscmd. CNG volumes declined 2.4% QoQ but grew 10.5% YoY to 3.7mmscmd. Sequential moderation in CNG volumes was attributed to seasonal monsoon-related weakness. Meanwhile, PNG-D volumes increased 14.3% QoQ but declined 3.6% YoY to 0.8mmscmd. Management highlighted its focus on diversifying industrial demand beyond Morbi into other industrial clusters to reduce volume concentration risk.

Gas Trading volumes remain stable; higher external sales:

GEL imported 14 LNG cargoes in Q2FY27 vs. 10 cargoes in Q1FY27. Trading volumes increased marginally to 12.3mmscmd from 12.2mmscmd QoQ. Of the total volumes, 7.6mmscmd was supplied to the internal CGD business (vs. 8.9mmscmd QoQ), while sales to external customers increased to 4.7mmscmd from 3.3mmscmd QoQ.

Oil production declines; gas production records sequential recovery:

Oil production declined 4.8% QoQ to 320bopd in Q2FY27, compared with 336bopd in Q1FY27. In contrast, gas production increased 22.8% QoQ 28,300scmd

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