23 Jun , 2022 By : Kanchan Joshi
Shares of Gujarat Gas plunged to 52-week low level of Rs403 apiece on the BSE in Thursday's early deals. Domestic brokerage and research firm Motilal Oswal is bullish on Gujarat Gas shares while retaining the stock as its top pick in the sector.
“Domestic gas availability is expected to rise by around 12mmscmd (RIL) and 10mmscmd (ONGC) over the next few months. Even at a 12% slope of Brent, it would be half of the current tied-up spot LNG prices. At current consumption of 10.5mmscmd, Gujarat Gas is expected to have ~1.7mmscmd of spot LNG in its sourcing," the note stated.
The brokerage house has reiterated its Buy rating on Gujarat Gas shares and retained it as top stock pick in the sector with a target price of Rs650 apiece, implying a potential upside of 60% from the current levels.
If it replaces the whole spot LNG by domestic gas at 12% slope, the sourcing cost for total industrial sales would be reduced by around Rs8/scm. While increased LPG installations would affect LNG consumption, especially during the summer season, overall, the brokerage does not expect it to be a threat to LNG penetration in the state.
After a long time, Gujarat Gas has started adding 100-150 CNG outlets each year. The wider spread of CNG outlets is likely to boost CNG volumes, which already reflects in the company’s quarterly sales performance. CNG volume is expected to grow at 15-20% annually, as per Motilal Oswal.
"There are five industrial clusters in Gujarat classified as critically/severely polluted with respect to air pollution. Over the long term, with the enforcement of stricter emission control measures by the authorities , we can expect an overall rise in demand for Gujarat Gas," it added.
Headquartered in Ahmedabad, Gujarat Gas Limited (GGL), owned by Gujarat State Petroleum Corporation (GSPL), is a leading City Gas Distribution Company. The Gujarat-based PSU gas stock has declined more than 35% in 2022 (YTD) so far, whereas is down 37% in a year's period.