Gujarat Gas reported softer than expected results in 4QFY19 with EBITDA 8% lower than JEFe led by EBITDA margin miss (Rs 4.3/scm; JEFe: Rs 4.8/scm) while volumes were 1.5% ahead. PAT, however, was 24% above JEFe due to lower taxes. But outlook is strong with Morbi volumes now at 4.5 mmscmd (uptick of 2 mmscmd vis-a-vis 1 mmscmd we build in) posing upside risks to our FY20E volume estimates. With the stock trading at 19x FY20E P/E, we keep our ‘Buy’.
Industrial volumes in 4QFY19 were down 6.8% q/q but came 1.6% ahead of JEFe while overall volumes declined 3% q/q coming 1.5% ahead of JEFe. EBITDA margins moderated q/q to Rs 4.3/scm in 4QFY19 (JEFe: Rs 4.8/scm). We have built in Rs 4.5/scm EBITDA margin in FY20E. EBITDA came 8.1% below JEFe mainly driven by the 9.5% miss in EBITDA margin while Gross margin was 2.4% below JEFe. Staff costs and other opex came ahead of JEFe.
