Gujarat Gas

Gujarat Gas’ fourth quarter ended December 2009 numbers came in line with expectation, net profit increased 43 per cent year-on-year to Rs 46 crore while top-line grew by 16.7 per cent to Rs 386 crore. Top-line was driven by both an improvement in average realisations and regassified-LNG (RLNG) volumes. Average realisations increased from Rs 12.8 per scm to Rs 13.8 per scm. The company’s gross gas spread touched an all-time high of Rs 4per cent scm and led to a 569 basis points expansion in OPMs to 19.9 per cent.

The company’s volumes continued to be supported by RLNG in the quarter as well, with 20 per cent of the total gas sourced being RLNG. This was on account of subdued RLNG prices. In the ensuing quarters also, expect RLNG volume to be robust as prices are expected to be subdued. Going ahead, RLNG and expected gas flow from KG-D6 will be the growth drivers. With incremental volumes likely to flow to the high-margin industrial retail segment, margins would expand going ahead. The potential appreciation of the rupee would be the icing on the cake. At Rs 266, the stock trades at 13 times its CY2011 estimated EPS of Rs 20.4. Maintain neutral.