Top Mid Cap PSU Gas Stock Gets Buy Call, Motilal Oswal Sees Stock Offering 45% Upside

Motilal Oswal has recommended investors to buy Gujarat Gas Ltd (GUJGA) with a target price of Rs 679 apiece as the analyst sees the stock rising. The current market price of the stock is Rs 467 apiece.

According to the analyst, "GUJGA can raise volumes through several avenues such as Ahmedabad rural, Amritsar, Bhatinda, and Thane rural in addition to the growth that would come from industrial/CNG pick up in the existing areas." Check key details:

1. Gujarat Gas Ltd Stock Performance & Return

The last trading price of the stock is Rs 467 apiece with an intraday dip of 0.83%. The stock's 52-week high is Rs 721 apiece and 52-week low is Rs 403 apiece, respectively. The company has market capitalisation of Rs 32,154 crore.

The stock has given return of 156% return in last 5-years and 78% in last 3-years. The stock has fallen 34% in last 1-year. In last 1-month, it has fallen 10% return.

2. Production Ramp-Up To Ease Heated Gas Price

Spot LNG price has cooled down notably to USD28.2/mmBtu in Dec'22 from the peak of USD54/mmBtu in Aug'22, led by higher gas production coupled with lower demand due to warmer-than-usual winter in the US/Europe as well as gas rationalization in Europe. Additionally, according to IGU, global liquefaction capacity is poised to expand by another 18.1mmt in CY23 after increasing 11mmt in CY22. This should exert further downward pressure on spot LNG prices. To give a perspective, the EU imported ~117mmt of gas from Russia in CY21.

3. Valuation

According to Motilal Oswal, "Owing to the challenges faced in CY22, the stock declined 17% during the year and is now trading at a reasonable valuation of 24x one-year forward P/E. Hence, we reiterate our BUY rating on GUJGA valuing the stock at 28x Dec'24E EPS to arrive at our TP of INR679. Slower-than-expected pick-up in volume or high gas prices adversely impacting both volume as well as margin can pose a key risk to our recommendation."

4. About Gujarat Gas

Gujarat Gas Limited (GGL) is India's largest City Gas Distribution (CGD) Company in terms of sales volume. GGL continues to hold the leadership position in CGD industry in terms of size and scale of operation, with more than 17.86 lakhs households, over 13,850 commercial customers, 741 CNG stations, 4,342 industrial units and over 34,000 kilometre of natural gas pipeline network.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.