Please

Gujarat Gas

Morbi boosts the g

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

Rs1.2bn growing 77% YoY and EBITDA of Rs2.5bn

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

industrial demand have seen volumes also decline QoQ (1% to 6.5mms

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

with volumes of 6.5mmscmd growing +5% YoY.

Volumes show muted growth

Volumes of 6.5

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

Q1FY20 is shaping to be a strong qu

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

Margins

Due largely to ~70% of GGL’s volumes coming from the Industri

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margin

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

sold b

sales from CNG/PNG and pollution control measures to strengthen pricing power for

the Ind/Comm segment as well.

Geographic expansion

GGL was the only

portfolio apart from existing areas and has been developing 11

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

to retain its positi

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

Valuation and risks

The aforementioned volume growth coupled with our expectation of a steady margin

expansion as well drives EPS CAGR of 38% over FY18

of 16/1/6% in volumes/gross margins and EBITDA/scm over FY19

term (and back ended) prospects for GGL and the steady state nature of cash flows

from this business, we value GGL using DCF till FY3

Rs205/sh, 28% upside.

Financial and valuation summary

YE Mar (Rs bn)

Revenue

EBITDA

EBITDA margin (%)

EBIT

Adj. PAT

Diluted EPS (Rs)

PE (x)

EV/EBITDA (x)

P/BV (x)

RoE (%)

Source: Company, Centrum Research estimates

Please see Appendix

Gujarat Gas

Morbi boosts the g

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

Rs1.2bn growing 77% YoY and EBITDA of Rs2.5bn

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

industrial demand have seen volumes also decline QoQ (1% to 6.5mms

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

with volumes of 6.5mmscmd growing +5% YoY.

Volumes show muted growth

Volumes of 6.5 mmscmd,

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

Q1FY20 is shaping to be a strong qu

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

Margins – Volatility remains but long term trends positive

Due largely to ~70% of GGL’s volumes coming from the Industri

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margin

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

sold being sourced using short

sales from CNG/PNG and pollution control measures to strengthen pricing power for

the Ind/Comm segment as well.

Geographic expansion

GGL was the only

portfolio apart from existing areas and has been developing 11

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

to retain its positi

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

Valuation and risks

The aforementioned volume growth coupled with our expectation of a steady margin

expansion as well drives EPS CAGR of 38% over FY18

of 16/1/6% in volumes/gross margins and EBITDA/scm over FY19

term (and back ended) prospects for GGL and the steady state nature of cash flows

from this business, we value GGL using DCF till FY3

Rs205/sh, 28% upside.

Financial and valuation summary

YE Mar (Rs bn)

Revenue

EBITDA

EBITDA margin (%)

EBIT

Adj. PAT

Diluted EPS (Rs)

PE (x)

EV/EBITDA (x)

P/BV (x)

RoE (%)

Source: Company, Centrum Research estimates

Appendix for analyst certifications and all other important disclosures

Gujarat Gas

Morbi boosts the g

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

Rs1.2bn growing 77% YoY and EBITDA of Rs2.5bn

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

industrial demand have seen volumes also decline QoQ (1% to 6.5mms

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

with volumes of 6.5mmscmd growing +5% YoY.

Volumes show muted growth

mmscmd, -4% YoY, came marginally below estimates. Volume growth

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

Q1FY20 is shaping to be a strong qu

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

Volatility remains but long term trends positive

Due largely to ~70% of GGL’s volumes coming from the Industri

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margin

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

eing sourced using short-

sales from CNG/PNG and pollution control measures to strengthen pricing power for

the Ind/Comm segment as well.

Geographic expansion – The crux of the matter

GGL was the only player prior to bid rounds 9/10 to aggressively build up its CGD

portfolio apart from existing areas and has been developing 11

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

to retain its position as the largest CGD player in the country over the next 5

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

Valuation and risks – Top pick in the gas space

The aforementioned volume growth coupled with our expectation of a steady margin

expansion as well drives EPS CAGR of 38% over FY18

of 16/1/6% in volumes/gross margins and EBITDA/scm over FY19

term (and back ended) prospects for GGL and the steady state nature of cash flows

from this business, we value GGL using DCF till FY3

Rs205/sh, 28% upside.

Financial and valuation summary

Q4FY19 Q4FY18

19,075 17,336

2,541

13.3% 12.8%

1,819

1,165

1.7

Source: Company, Centrum Research estimates

for analyst certifications and all other important disclosures

Morbi boosts the growth engine

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

Rs1.2bn growing 77% YoY and EBITDA of Rs2.5bn

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

industrial demand have seen volumes also decline QoQ (1% to 6.5mms

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

with volumes of 6.5mmscmd growing +5% YoY.

4% YoY, came marginally below estimates. Volume growth

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

Q1FY20 is shaping to be a strong quarter, with current volume run rate at 8.5mmscmd

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

Volatility remains but long term trends positive

Due largely to ~70% of GGL’s volumes coming from the Industri

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margin

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

-term LNG (which has softer pricing linkage), stronger

sales from CNG/PNG and pollution control measures to strengthen pricing power for

the Ind/Comm segment as well.

The crux of the matter

player prior to bid rounds 9/10 to aggressively build up its CGD

portfolio apart from existing areas and has been developing 11

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

on as the largest CGD player in the country over the next 5

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

pick in the gas space

The aforementioned volume growth coupled with our expectation of a steady margin

expansion as well drives EPS CAGR of 38% over FY18

of 16/1/6% in volumes/gross margins and EBITDA/scm over FY19

term (and back ended) prospects for GGL and the steady state nature of cash flows

from this business, we value GGL using DCF till FY3

Q4FY18 YoY (%)

17,336 10.0

2,227 14.1

12.8%

1,545 17.7

660 76.7

1.0 76.7

Source: Company, Centrum Research estimates

for analyst certifications and all other important disclosures

engine!

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

Rs1.2bn growing 77% YoY and EBITDA of Rs2.5bn (+14% YoY). However, the strong

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

industrial demand have seen volumes also decline QoQ (1% to 6.5mms

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

with volumes of 6.5mmscmd growing +5% YoY.

4% YoY, came marginally below estimates. Volume growth

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

arter, with current volume run rate at 8.5mmscmd

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

Volatility remains but long term trends positive

Due largely to ~70% of GGL’s volumes coming from the Industri

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margin

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

term LNG (which has softer pricing linkage), stronger

sales from CNG/PNG and pollution control measures to strengthen pricing power for

The crux of the matter

player prior to bid rounds 9/10 to aggressively build up its CGD

portfolio apart from existing areas and has been developing 11

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

on as the largest CGD player in the country over the next 5

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

pick in the gas space

The aforementioned volume growth coupled with our expectation of a steady margin

expansion as well drives EPS CAGR of 38% over FY18-21E. Our estimates imply a CAGR

of 16/1/6% in volumes/gross margins and EBITDA/scm over FY19

term (and back ended) prospects for GGL and the steady state nature of cash flows

from this business, we value GGL using DCF till FY34E, which delivers a price target of

Q3FY19 QoQ

21,174 (9.9

3,212 (20.9

15.2%

2,484 (26.8

1,496 (22.1

2.2 (22.1

for analyst certifications and all other important disclosures

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

(+14% YoY). However, the strong

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

industrial demand have seen volumes also decline QoQ (1% to 6.5mmscmd), which is

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

4% YoY, came marginally below estimates. Volume growth

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

arter, with current volume run rate at 8.5mmscmd

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

Volatility remains but long term trends positive

Due largely to ~70% of GGL’s volumes coming from the Industrial/Commercial sector

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margin

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

term LNG (which has softer pricing linkage), stronger

sales from CNG/PNG and pollution control measures to strengthen pricing power for

player prior to bid rounds 9/10 to aggressively build up its CGD

portfolio apart from existing areas and has been developing 11-12 new districts over

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

on as the largest CGD player in the country over the next 5

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

The aforementioned volume growth coupled with our expectation of a steady margin

21E. Our estimates imply a CAGR

of 16/1/6% in volumes/gross margins and EBITDA/scm over FY19-21E. Gi

term (and back ended) prospects for GGL and the steady state nature of cash flows

E, which delivers a price target of

(%) FY19P

9.9) 77,544 99,970

20.9) 10,039 14,302

12.9%

26.8) 7,159 11,239

22.1) 4,094

22.1) 5.9

25.7

12.8

5.0

19.6

for analyst certifications and all other important disclosures.

Gujarat Gas (GGL) reported another strong YoY growth in profitability with PAT of

(+14% YoY). However, the strong

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

driven a QoQ decline of 21%/16% in EBITDA/PAT. Seasonal factors and lower

cmd), which is

also 4% lower YoY. Gross margins of Rs7.6/scm are down Rs0.56/scm QoQ but they

have improved sharply YoY. FY19 EBITDA/PAT of Rs9.9/4.3bn grew 10%/47% YoY,

4% YoY, came marginally below estimates. Volume growth

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

(+4% YoY, CenE 0.64mmscmd) while Ind/Comm volumes of 4.39mmscmd fell 8% YoY.

arter, with current volume run rate at 8.5mmscmd

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

al/Commercial sector

(sourced via market linked gas and sold in a competitive market), margins for the

company have always been more volatile than peers (IGL/MGL) which have ~70% of

volumes from the domestic PNG/CNG segment where gas costs and hence margins

tend to be stable. Margins overall for GGL have been volatile (EBITDA/scm has ranged

from Rs2.3/scm to Rs4.6/scm in the last six years). We believe, however, that

directionally, margins will only improve from here, with a larger portion of volumes

term LNG (which has softer pricing linkage), stronger

sales from CNG/PNG and pollution control measures to strengthen pricing power for

player prior to bid rounds 9/10 to aggressively build up its CGD

12 new districts over

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

on as the largest CGD player in the country over the next 5-7 years.

Our estimates of area by area potential suggest that overall volumes can grow >2x by

FY25E for the company to 14.1mmscmd from current 6.5mmscmd, a CAGR of ~14%

The aforementioned volume growth coupled with our expectation of a steady margin

21E. Our estimates imply a CAGR

21E. Given the longer

term (and back ended) prospects for GGL and the steady state nature of cash flows

E, which delivers a price target of

FY20E FY21E

99,970 104,944

14,302 14,993

14.3 14.3

11,239 11,738

7,029 7,625

10.2 11.1

15.7 14.4

8.4 7.7

4.0 3.2

25.4 22.4

Changes in the report

Rating:

Target Price:

Earnings estimates:

Source: Bloomberg

Gujarat Gas relative to Nifty Midcap 100

Source: Bloomberg

Shareholding pattern

Promoter

FIIs

DIIs

Public/oth

Source: BSE

base of Q3 (EBITDA/PAT grew 61/149% YoY) and price cuts in industrial segment have

cmd), which is

was driven by CNG (1.5 mmscmd, +9% YoY, in line), Dom PNG volumes of 0.63mmscmd

arter, with current volume run rate at 8.5mmscmd

supported by NGT order for pollution measures in Morbi region and softer LNG prices.

the last few years. Add to that the 7 new areas won in Rounds 9 & 10, GGL is expected

ven the longer

FY21E

104,944

14,993

14.3

11,738

7,625

11.1

14.4

7.7

3.2

22.4

Market Data

Bloomberg:

52 week H/L:

Market cap:

Shares outstanding:

Free float:

Avg. daily vol. 3mth:

Source: Bloomberg

Changes in the report

Target Price:

Earnings estimates:

Source: Bloomberg

Gujarat Gas relative to Nifty Midcap 100

Bloomberg

Shareholding pattern

Dec-18 Sep-18

60.9 60.9

12.8 13.9

3.9 3.4

22.4 21.7

Market Data

Bloomberg:

52 week H/L:

Market cap:

outstanding:

Avg. daily vol. 3mth:

Source: Bloomberg

Analyst, Oil & Gas

+91 22 4215 9001

probal.sen@centrum.co.in

Result Update

India I

6 May 2019

Target

Forecast return:

Gujarat Gas relative to Nifty Midcap 100

18 Jun-18 Mar

60.9 60.9

13.9 14.0

3.4 3.4

21.7 21.6

GUJGA IN

183/115

Rs109.6bn

688.4mn

18.6%

894,424

Probal Sen

Analyst, Oil & Gas

+91 22 4215 9001

probal.sen@centrum.co.in

Result Update

I Oil & Gas

6 May 2019

BUY Target Price: Rs205

Price: Rs160

Forecast return: 28%

Institu

tion

al R

ese

arch

NA

NA

NA

Mar-18

60.9

13.4

3.3

22.4

GUJGA IN

183/115

Rs109.6bn

688.4mn

18.6%

894,424

Oil &

Ga

s

Gujarat Gas

Centrum Institutional Research

Estimate revisions

YE Mar (Rs bn)

Revenue

EBITDA

EBITDA margin

Adj. PAT

Diluted EPS (Rs)

Source: Centrum Research estimates

Centrum estimates vs Actual results

YE Mar (Rs bn)

Revenue

EBITDA

EBITDA margin

Adj. PAT

Source: BloombergCentrum Research estimates

Gujarat Gas

GUJGA IN

NIFTY Midcap 100

Source: Bloomberg, NSE

Key assumptions

YE Mar (Rs bn)

Brent (US$/bbl)

INR/USD

Volumes (mmscm)

Volumes (mmscmd)

CNG (mmscmd)

Domestic (mmscmd)

Industrial/Commercial (mmscmd)

Avg realisation (Rs/scm)

Raw material cost (Rs/scm)

Gross margin (Rs/scm)

EBITDA margin (Rs/scm)

Source: Centrum Research estimates

Gujarat Gas

Centrum Institutional Research

Estimate revisions

YE Mar (Rs bn) FY20E

Revenue 99,970

EBITDA 14,302

EBITDA margin 14.3%

Adj. PAT

Diluted EPS (Rs)

Source: Centrum Research estimates

Centrum estimates vs Actual results

YE Mar (Rs bn)

Revenue

EBITDA

EBITDA margin

Adj. PAT

Source: BloombergCentrum Research estimates

Gujarat Gas versus

GUJGA IN

NIFTY Midcap 100

Source: Bloomberg, NSE

Key assumptions

YE Mar (Rs bn)

Brent (US$/bbl)

INR/USD

Volumes (mmscm)

Volumes (mmscmd)

CNG (mmscmd)

Domestic (mmscmd)

Industrial/Commercial (mmscmd)

Avg realisation (Rs/scm)

Raw material cost (Rs/scm)

Gross margin (Rs/scm)

EBITDA margin (Rs/scm)

Source: Centrum Research estimates

Centrum Institutional Research

Estimate revisions FY20E

New

FY20E

Old

99,970 99,970

14,302 14,302

14.3% 14.3%

7,029 7,029

10.2 10.2

Source: Centrum Research estimates

Centrum estimates vs Actual resultsCentrum

Q4FY1

19,077

14.4%

Source: BloombergCentrum Research estimates

versus NIFTY Midcap 100

1m

(5.0)

Source: Bloomberg, NSE

Key assumptions

Domestic (mmscmd)

Industrial/Commercial (mmscmd)

Avg realisation (Rs/scm)

Raw material cost (Rs/scm)

Gross margin (Rs/scm)

EBITDA margin (Rs/scm)

Source: Centrum Research estimates

Centrum Institutional Research

% chg

FY21E

New

0.0 104,944

0.0 14,993

14.3%

0.0 7,625

0.0 11.1

Centrum estimates vs Actual resultsCentrum

Q4FY19

Actual

Q4FY19

19,077 19,075

2,754 2,541

14.4% 13.3%

1,129 1,165

Source: BloombergCentrum Research estimates

NIFTY Midcap 100

1m

3.5 24.8

(5.0)

FY19

71.0

69.9

2,387

6.5

1.4

0.5

4.6

32.5

25.4

7.1

4.1

FY21E

New

FY21E

Old % chg

104,944 104,944

14,993 14,993

14.3% 14.3%

7,625 7,625

11.1 11.1

Centrum estimates vs Actual results ctual

Q4FY19

Variance

19,075

2,541 (7.7

13.3%

1,165

NIFTY Midcap 100

6m 1 year

24.8 (5.4)

0.4 (12.1)

FY20E FY21E

70.5 70.0

70.3 70.0

3,033 3,214

8.3

1.6

0.6

6.2

33.0 32.7

25.7 25.5

7.2

4.7

Thesis Snapshot

% chg

0.0

0.0

0.0

0.0

Variance

(%)

0.0

7.7)

3.3

year

(5.4)

(12.1)

FY21E

70.0

70.0

3,214

8.8

1.7

0.6

6.5

32.7

25.5

7.2

4.7

Valuations

Given the longer term (and back ended) prospects for GGL

and the steady state nature of cash flows from this business

we value GGL using DCF till FY34

reaching 14.1mmscmd by

WACC of 11% and Terminal growth of 3.5%.

Valuations

NPV (explicit period)

Terminal Value Rsm

PV of Terminal value Rsm

TOTAL NPV Rsm

Per share

CMP

Upside

P/E mean and standard deviation

EV/EBITDA

Source: Bloomberg, Centrum Research estimates

Thesis Snapshot

Valuations

Given the longer term (and back ended) prospects for GGL

and the steady state nature of cash flows from this business

we value GGL using DCF till FY34

reaching 14.1mmscmd by

WACC of 11% and Terminal growth of 3.5%.

Valuations (DCF FY19

NPV (explicit period)

Terminal Value Rsm

PV of Terminal value Rsm

TOTAL NPV Rsm

Per share

CMP

Upside (downside) %

P/E mean and standard deviation

EV/EBITDA mean and standard deviation

Source: Bloomberg, Centrum Research estimates

Thesis Snapshot

Given the longer term (and back ended) prospects for GGL

and the steady state nature of cash flows from this business

we value GGL using DCF till FY34

reaching 14.1mmscmd by FY25E and 21.4mmscmd by FY32E,

WACC of 11% and Terminal growth of 3.5%.

(DCF FY19-34E)

NPV (explicit period) Rsm

Terminal Value Rsm

PV of Terminal value Rsm

(downside) %

P/E mean and standard deviation

mean and standard deviation

Source: Bloomberg, Centrum Research estimates

Given the longer term (and back ended) prospects for GGL

and the steady state nature of cash flows from this business

we value GGL using DCF till FY34E. We factor volumes

FY25E and 21.4mmscmd by FY32E,

WACC of 11% and Terminal growth of 3.5%.

mean and standard deviation

Source: Bloomberg, Centrum Research estimates

6 May 2019

Given the longer term (and back ended) prospects for GGL

and the steady state nature of cash flows from this business

E. We factor volumes

FY25E and 21.4mmscmd by FY32E,

74,486

317,593

66,392

140,878

6 May 2019

2

Given the longer term (and back ended) prospects for GGL

and the steady state nature of cash flows from this business

E. We factor volumes

FY25E and 21.4mmscmd by FY32E,

74,486

317,593

66,392

140,878

205

160

28

6 May 2019

3Centrum Institutional Research

Gujarat Gas

Quarterly call highlights

���� FY19 volumes of 6.5 mmscmd (6.5 mmscmd in Q4FY19) are the highest since FY15,

with next few years likely to see stronger growth. The coal gasifier ban in Morbi

provides a structural boost of ~2mmscmd which supports other organic and inorganic

growth prospects over the next five years

���� Development of 11-12 new districts already underway, with Vadodara, Amritsar and

Bhatinda also likely to come to GGL’s kitty in FY20 while they are to start

development of additional GAs won in CGD bid rounds IX/X over the year as well (7

GAs)

���� Margins of Rs7.6/scm (gross) and Rs4.3/scm (EBITDA) are at four year highs due to

stronger pricing and softer gas costs and we see this trend accelerating over FY20-

22E, with LNG price linkage to remain below historical trends, CNG, PNG growing

strongly and pollution control measures aiding conversion from coal to gas

���� Assuming a potential of 0.25 mmscmd being reached in five years from each area and

a capex of Rs1.5-2bn we estimate an incremental EBITDA potential of Rs2.5-3.2bn for

GGL, which is between 29-36% of FY18 EBITDA for GGL

���� We factor an aggressive volume growth trajectory in the near term, with volume

CAGR of 16% over FY19-21E and 14% over FY19-25E – This, coupled with a steady

state EBITDA/scm assumption of Rs4.4/scm drives a 38% EPS CAGR over FY18-21E.

Volumes – a relatively muted quarter but strong growth ahead

In Q4, volumes were at 6.5 mmscmd, -4% YoY, marginally lower than CenE 6.6mmscmd. A

sharply higher trend is being seen in CNG segment (+9% YoY, 5% for FY19) with

management guidance of exceeding the 69 stations in FY19 via another 80-85 in FY20-21E

– the highest ever by the company. Industrial volumes were a tad weak due to the festival

season in Q3-Q4 and we expect a gradual return to stronger growth over the next few

quarters. One key factor that has driven volumes over April and May for the company to

8.5 mmscmd from 6.5mmscmd is the coal gasifier ban at Morbi – 100s of Indutrioal units

in the Ceramic Hub of Morbi were using coal gasifiers to produce gas which took away

>2mmscmd of gas from GGL’s portfolio over FY15-17; which has come back in a rush in

Q1FY20 itself. Driven by this we are positive on growth prospects:

Development of the newer areas (table below in Figure 3) starting FY18 is likely to drive a

steady increment to existing areas, which should support strong volume growth for GGL

over the next 2-3 years. Additionally, GGL is also close to finalising the buyout of GAIL’s

50% stake in Vadodara Gas, subject to regulatory clearances, while our sense is that the

Amritsar/Bhatinda licenses might be transferred to GGL from group company GSPC Gas.

We continue to build volume CAGR of 16% over FY19-21E.

One key factor that has driven

volumes over April and May for

the company to 8.5 mmscmd

from 6.5mmscmd is the coal

gasifier ban at Morbi

6 May 2019

4Centrum Institutional Research

Gujarat Gas

Fig 1: Quarterly volume trends

Source: GGL, Centrum Research

Fig 2: Segment wise volume trends Q1FY18-Q4FY19

Source: GGL, Centrum Research

GAIL entry into Morbi – Gas on gas competition makes an entry but uncertainties remain

The recent news reports of GAIL trying to approach the Morbi Industrial units directly to

sell Gas, bypassing GGL, which has been the sole supplier of gas in the area for a long time

has caught us by surprise. Till now policy directions and government priority has always

been on growing the CGD presence by encouraging new area development and not really

pushing for gas on gas competition. Hence GAIL’s initiative if accurate is a reversal of the

industry trend till date. The sudden spurt in gas volumes in the region (current volumes at

4.5mmscmd up from 2.5mmscmd earlier) due to the implementation of a complete ban

on coal gasifiers has driven this increase. GGL has therefore benefited from this event and

GAIL is presumably trying to cash in as well – Our take is that while the advent of gas on

gas competition is a negative, we do not really see a material impact as of now:

���� The first hiccup in this whole development is that we are not sure how the pricing

would play out; while the reports indicate the spot LNG price at Dahej as the

benchmark ($7.5/mmbtu) adding transmission charges of GSPL till Morbi and then

third party usage charges of GGL + marketing margins will still add significant delta to

price and bring it closer to GGL’s current Industrial gas cost of ~Rs28/scm

���� We are not certain of the spare capacity available at GSPL/GGL to provide “open

access” to GAIL any more than the 0.5mmscmd that has been reported. If the market

share loss is restricted to 0.3-0.4mmscmd it is not really material (impact of Rs350m

of PAT or Rs0.5/sh). The impact is less than for other industrial regions since GGL

anyways supplies gas at a discount of Rs1.7-1.8/scm to Morbi vs other industrial

5.45.1 5.2 5.3

6.1 6.15.7

6.3

6.86.4

6.7 6.6 6.5

1.8

2.8

3.8

4.8

5.8

6.8

7.8

4QFY16 2QFY17 4QFY17 2QFY18 4QFY18 2QFY19 4QFY19

mm

scm

d

1.3 1.3 1.3 1.4 1.4 1.4 1.4 1.5

0.4 0.5 0.5 0.6 0.4 0.5 0.5 0.6

4.4 4.0 4.5

4.8 4.6 4.7 4.6 4.4

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

Axi

s T

itle

CNG Domestic PNG Ind/Comm PNG

Centrum Institutional Research

Gujarat Gas

Fig 4:

Source: GGL, Centrum Research

Centrum Institutional Research

Gujarat Gas

Fig 4: xxxxxxx

Source: GGL, Centrum Research

Centrum Institutional Research

Source: GGL, Centrum Research

Centrum Institutional Research

prices Additionally, we also highlight that we have built in a conservative 3

3.5mmscmd of gas demand from Morbi region over the next two years, which is

lower than the potential demand of 4

indicates room for more than one player in the region

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

of this news before taking a definitive negative stance on the same

estimates of 3.5

Fig 3: Potential volumes from Pre IX and X round of bid

GA (pre Round IX/X)*

Dahej

Ahmedabad district

Thane rural

Jamnagar

Bhavnagar (incl Bhotad)

Dadra & Nagar Haveli

Panchmahal (Halol)

Kutch west

Hazira

Narmada

Amritsar + Bhatinda*

Vadodara*

Source: GGL, Centrum Research

���� The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

well connected gas market is relevant for the CNG segment

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

lot of intercity travel.

���� The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

similar additions

segment over FY20

a stronger margin profile for the company.

prices Additionally, we also highlight that we have built in a conservative 3

3.5mmscmd of gas demand from Morbi region over the next two years, which is

lower than the potential demand of 4

indicates room for more than one player in the region

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

of this news before taking a definitive negative stance on the same

estimates of 3.5-4 mmscmd of Gas from Morbi to GGL stays.

Potential volumes from Pre IX and X round of bid

GA (pre Round IX/X)*

Ahmedabad district

Thane rural

Jamnagar

Bhavnagar (incl Bhotad)

Dadra & Nagar Haveli

Panchmahal (Halol)

Kutch west

Amritsar + Bhatinda*

Vadodara*

GGL, Centrum Research

The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

well connected gas market is relevant for the CNG segment

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

lot of intercity travel.

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

similar additions

segment over FY20

a stronger margin profile for the company.

prices Additionally, we also highlight that we have built in a conservative 3

3.5mmscmd of gas demand from Morbi region over the next two years, which is

lower than the potential demand of 4

indicates room for more than one player in the region

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

of this news before taking a definitive negative stance on the same

4 mmscmd of Gas from Morbi to GGL stays.

Potential volumes from Pre IX and X round of bid

Year won

Jun-

Jun-

Apr-

Jan-

Mar

Apr-

Jul-

Dec-

Jul-

Sep-

NM

NM

GGL, Centrum Research

The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

well connected gas market is relevant for the CNG segment

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

lot of intercity travel.

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

similar additions and that is expected to drive double digit volume growth in the CNG

segment over FY20-22E- this creates more stability in volume trends and also creates

a stronger margin profile for the company.

prices Additionally, we also highlight that we have built in a conservative 3

3.5mmscmd of gas demand from Morbi region over the next two years, which is

lower than the potential demand of 4-4.5mmscmd if all the units convert to gas which

indicates room for more than one player in the region

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

of this news before taking a definitive negative stance on the same

4 mmscmd of Gas from Morbi to GGL stays.

Potential volumes from Pre IX and X round of bid

Year won 5 yr vols potential (mmscmd)

-16

-16

-15

-14

Mar-14

-15

-16

-14

-14

-18

NM

NM

The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

well connected gas market is relevant for the CNG segment

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

and that is expected to drive double digit volume growth in the CNG

this creates more stability in volume trends and also creates

a stronger margin profile for the company.

prices Additionally, we also highlight that we have built in a conservative 3

3.5mmscmd of gas demand from Morbi region over the next two years, which is

5mmscmd if all the units convert to gas which

indicates room for more than one player in the region

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

of this news before taking a definitive negative stance on the same

4 mmscmd of Gas from Morbi to GGL stays.

Potential volumes from Pre IX and X round of bid

5 yr vols potential (mmscmd)

1mmscmd (5+ yrs)

1.5-2mmscmd (5+ yrs)

1.5mmscmd (5+ yrs)

0.5mmscmd (5 yrs)

0.5mmscmd (5+ yrs)

1.2mmscmd (5+ yrs)

0.5mmcmd (5+yrs)

0.3mmscmd (5 yrs)

0.4mmscmd (5 yrs)

0.2 mmscmd (5 years)

0.6 mmscmd (5 years)

0.5 mmscmd (5 years)

8.6

The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

well connected gas market is relevant for the CNG segment

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

and that is expected to drive double digit volume growth in the CNG

this creates more stability in volume trends and also creates

prices Additionally, we also highlight that we have built in a conservative 3

3.5mmscmd of gas demand from Morbi region over the next two years, which is

5mmscmd if all the units convert to gas which

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

of this news before taking a definitive negative stance on the same. As of now our

5 yr vols potential (mmscmd)

1mmscmd (5+ yrs)

2mmscmd (5+ yrs)

1.5mmscmd (5+ yrs)

0.5mmscmd (5 yrs)

0.5mmscmd (5+ yrs)

1.2mmscmd (5+ yrs)

0.5mmcmd (5+yrs)

0.3mmscmd (5 yrs)

0.4mmscmd (5 yrs)

0.2 mmscmd (5 years)

0.6 mmscmd (5 years)

0.5 mmscmd (5 years)

The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

well connected gas market is relevant for the CNG segment – the more connected the

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

and that is expected to drive double digit volume growth in the CNG

this creates more stability in volume trends and also creates

Dahod/Panchmahal

Anand/Ahmedabad ext

Amreli

Dahej

Jamnagar

Presence in the largest and

most well connected gas

market in the country (GGL +

GSPC Gas areas now under one

merged entity),

with 7 more wins in the latest

bid rounds

6 May 2019

prices Additionally, we also highlight that we have built in a conservative 3-

3.5mmscmd of gas demand from Morbi region over the next two years, which is

5mmscmd if all the units convert to gas which

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

. As of now our

5 yr capex Rsbn

1.0

3.0

2.0

0.8

0.8

1.5

0.8

0.4

0.5.

0.3

4.0

2.0

16.5

The expansion of GGL even deeper into the state of Gujarat brings its own

advantages, the expansion and deepening of the gas grid in what is already the most

ore connected the

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

and that is expected to drive double digit volume growth in the CNG

this creates more stability in volume trends and also creates

Dahod/Panchmahal

/Ahmedabad ext

Presence in the largest and

most well connected gas

market in the country (GGL +

GSPC Gas areas now under one

merged entity), growing bigger

with 7 more wins in the latest

6 May 2019

5

5mmscmd if all the units convert to gas which

Our view therefore is that clarity needs to emerge on the regulatory and economic aspect

5 yr capex Rsbn

advantages, the expansion and deepening of the gas grid in what is already the most

ore connected the

gas grid and refuelling infra is, the easier it is for vehicles to convert even if they do a

The volume mix for the company is also seeing a change, with the addition of 69 CNG

stations for GGL in FY19 the highest ever for the company. FY20 is also likely to see

and that is expected to drive double digit volume growth in the CNG

this creates more stability in volume trends and also creates

GSPC Gas areas now under one

growing bigger

with 7 more wins in the latest

6 May 2019

6Centrum Institutional Research

Gujarat Gas

Fig 5: Multiple drivers of volume growth over FY19-25E

Source: GGL, Centrum Research

Fig 6: Segment wise volume trends FY17-22E

Source: GGL, Centrum Research estimates

Strong volume growth envisaged over the next 5-7 years

Overall, we see volumes growing >2x for GGL from current levels to 14.1mmscmd by

FY25E, with 3.3mmscmd contributed by the newer areas while existing areas also grow

steadily to 11 mmscmd. More aggressive anti-pollution measures specifically for CNG

presents an upside risk given the complete lack of regulatory support for CNG in Gujarat vs

what has been seen in National Capital Region (NCR). Gujarat has got a significantly large

population of addressable vehicles and any regulatory support even for state transport

and private taxis can deliver a growth boost to GGL’s CNG volumes.

Fig 7: Penetration of CNG network

Penetration Gujarat Delhi Mumbai

Area (sq.km) 1,96,024 1,484 603

Total vehicles 40,00,000 28,00,000 12,00,000

CNG vehicles (estimated) 3,85,000 10,27,700 4,00,000

Penetration 9.6% 36.7% 33.3%

CNG stations 290 463 210

CNG sales (mmcmd) 1.4 3.9 2.1

Source: GGL, PPAC, Centrum Research

6.5

14.12.0

3.3

1.2

1.1

-

4.0

8.0

12.0

16.0

FY19 volumes Morbi Pollution

boost

New areas CNG/PNG/Eco

revival

LFR customers FY25E potential

0.5 0.5 0.5 0.6 0.6 0.7

1.2 1.3 1.4 1.6 1.7 1.8

3.8 4.4 4.6

6.2 6.5 6.7

-

2.0

4.0

6.0

8.0

10.0

FY17 FY18 FY19 FY20E FY21E FY22E

mm

scm

d

Dom CNG Ind/Comm

6 May 2019

7Centrum Institutional Research

Gujarat Gas

Margins – The way ahead is up

GGL reported gross margins of Rs7.6/scm and EBITDA/scm of Rs4.3/scm in Q4, dipping vs

the record highs seen in Q3FY19 but still well above the levels of Rs6.2/scm gross margin

and Rs3.7/scm EBITDA seen in Q4FY18. For FY19, GGL has reported gross margins of

Rs7.1/scm and EBITDA/scm of Rs4.2/scm, a growth of 7.5/6.7% respectively. Blended

realisations of Rs32.6/scm coupled with stable gas cost QoQ of Rs25/scm for the quarter

drove margins.

Fig 8: Qtrly movement in Gross / EBITDA margins

Source: GGL, Centrum Research

One primary reason why GGL has always been looked at differently vs peers by investors

has been its volatile margin profile. There are two key reasons for the same: GGL has the

highest market price linked gas sourcing portfolio vs peers and LNG prices both on long

term and short term linkages have been unusually volatile over the last few years. GGL has

to often face a well organised industrial association or bodies while passing through an

increase in gas purchase costs; a situation not faced by other players.

Fig 9: EBITDA margins have been volatile over FY14-19

Source: GGL, Centrum Research

Strong Crude prices ensure stronger competitiveness to alternate fuels

We agree that rising crude prices ultimately hurt every sub-segment in the Oil & Gas

coverage universe, given the import dependency and the correlation gas prices have with

oil prices. However, in the CNG/ residential PNG segment, the relatively low domestic gas

prices (which have a weak link with crude), coupled with sustained rise in alternate fuel

7.5

6.7 6.0 6.2

7.1

5.6

8.1 7.6

4.8

3.8 3.5 3.7

4.2

2.9

5.3

4.3

-

2.0

4.0

6.0

8.0

10.0

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

Rs

Gross margin/scm EBITDA/scm

4.6

6.4 5.9

6.3 6.6

7.0

2.7

4.6

3.6 3.8 3.9 4.1

-

2.0

4.0

6.0

8.0

FY14 FY15 FY16 FY17 FY18 FY19

Rs

Gross margin/scm EBITDA margin/scm

6 May 2019

8Centrum Institutional Research

Gujarat Gas

prices like LPG/Naphtha/FO are expected to drive higher demand growth over the next

two years, irrespective of regulatory support.

Fig 10: Economics for CNG vs other fuels remains attractive

Delhi Gujarat

Petrol Diesel CNG Petrol Diesel CNG

Price (Rs/ltr; Rs/kg for CNG) 72.9 66.3 45.7 70.7 69.9 54.7

Mileage km/ltr or kg 12.0 18.0 20.0 12.0 18.0 20.0

Cost (Rs/km) 6.1 3.7 2.3 5.9 3.9 2.7

CNG discount (%) (56) (17) (56) (1}

Daily running assumptions (kms) 40.0 40.0 40.0 40.0 40.0 40.0

Dailly cost (Rs) 243.1 147.4 91.4 235.5 155.3 109.4

Annual cost (Rs) 88,732 53,785 33,361 85958 56672 39931

Savings vs Petrol 34,947 55,371 29285 46027

CNG /Diesel conversion kit cost

Rs 1,000,000 30,000 100,000 30000

Payback (months) 34.3 6.5 41.0 7.8

Source: PPAC, GGL, Centrum Research

Fig 11: LNG remains competitive vs other liquid fuels as well

US$/bbl (mmbtu/bbl) $/mmbtu price % diff LT LNG % diff ST LNG

Brent 72.0 5.9 12.2 (41) (21)

Naphtha 69.5 5.3 13.1 (45) (26)

FO 66.0 6.4 10.3 (30) (6)

HSD 84.5 5.7 14.8 (51) (35)

Petrol 82.0 5.8 14.1 (49) (32)

LPG 52.0 4.5 11.6 (38) (16)

LNG Long term ($/mmbtu) 9.7 1.0 9.7 (26) 0

LNG (ST) ($/mmbtu) 7.2 1.0 7.2 0 34

Source: Bloomberg, GGL, Centrum Research

The higher competitiveness vs alternate fuels is likely to expand as product spreads

improve, specifically for petrol/diesel, which remain below historical levels. Also, the LNG

prices used for short term LNG are assumed at 10% slope to Brent whereas current prices

are trending at < 7% linkage to Brent Crude.

Fig 12: Spot LNG prices as a % of Crude

Source: Bloomberg, GGL, Centrum Research

0.0

5.0

10.0

15.0

20.0

25.0

Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0%

$/m

mb

tu L

HS

Spot LNG price Linkage to Crude -RHS

Linkage to Crude has collapsed in

recent months; bodes well for CGD

price competitiveness

6 May 2019

9Centrum Institutional Research

Gujarat Gas

Spot price linkage remains benign

The spot LNG prices are more relevant for GGL’s gas costs going forward as every

incremental molecule of Ind/comm gas sold by GGL would be sourced via spot LNG. The

company has mid term and long term contracts for 3.4 mmscmd with BG and PLNG while

their Ind/Comm volumes are already at 4.65 mmscmd (balance being met via spot LNG).

So any additional volumes hereon will be met by more short term/spot LNG.

Fig 13: Share of spot/short term LNG rising steadily

Source: GGL, Centrum Research estimates

Domestic Gas costs to remain soft as well

We mentioned earlier about the rising proportion of Domestic Gas and CNG in the overall

portfolio of GGL and this is relevant due to the government policy of allocating domestic

gas to 100% of volumes sold to these two segments. The government mandated formula

for determining domestic gas prices (formerly APM Gas) takes into account the following:

���� Russian Domestic Gas price

���� Henry Hub prices in the USA

���� European NBP price

���� Canadian Alberta price

Of the 4 mentioned above 3 prices are of gas surplus countries hence the domestic price

typically is at a significant discount to market prices – this ensures that Domestic

PNG/CNG prices for customers are affordable and also ensures higher margins for the

CGDs.

Fig 14: Domestic gas prices have risen recently but remain well below market prices

Source: PPAC, GGL, Centrum Research

1.7 1.9 2.1 2.2 2.4

1.0 1.0 1.0

1.0 1.0

2.5

2.4 2.3

2.3 2.3

0.2 1.0 1.2

2.8 3.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY17 FY18 FY19 FY20E FY21E

Domestic Gas (APM + other) PLNG firm BG firm Spot /Short term LNG

4.2

5.65.2

4.2

3.4

2.8

5.6

3.2 3.43.8

4.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Till

Oct

20

14

Oct

- M

ar

15

Ap

r-Se

p1

5

Oct

15

-Ma

r 1

6

Ap

r-Se

p1

6

Oct

16

-Ma

r17

Ap

r-Se

p1

7

Oct

17

-Ma

r17

Ap

r-Se

p1

8

Oct

18

-Ma

r19

Ap

r-Se

p1

9

$/m

mb

tu

6 May 2019

10Centrum Institutional Research

Gujarat Gas

Our estimates imply domestic gas prices will remain benign at US$4.5-5/mmbtu ensuring

adequate pricing power for GGL in these two segments and supporting profitability as the

share of these two segments rises steadily in overall pie of GGL.

Fig 15: Segmental and overall gross margins

Source: GGL, Centrum Research estimates

Fig 16: EBITDA/scm estimates

Source: GGL, Centrum Research estimates

Financial analysis – comprehensive improvement in metrics

We expect the combination of strong volume growth and steady improvement in margins

to deliver a 23% CAGR in EBITDA and a 33% CAGR in Adj. PAT over FY19-21E – This number

is predicated on gross margins of Rs7.2 per scm over FY20/21E and EBITDA/scm of

Rs4.7/scm over the period.

-

4.0

8.0

12.0

16.0

20.0

FY16 FY17 FY18 FY19 FY20E FY21E

Rs

/ SC

M

CNG Dom PNG Ind/Comm Overall

3.6 3.8

3.9 4.1

4.7 4.7

-

1.0

2.0

3.0

4.0

5.0

FY16 FY17 FY18 FY19 FY20E FY21E

%

6 May 2019

11Centrum Institutional Research

Gujarat Gas

Fig 17: EBITDA/PAT/EPS progression FY16-21E

Source: GGL, Centrum Research estimates

We expect both absolute and margin improvement across segments for GGL, driven by

improved pricing power and relatively softer gas costs. Our assumptions build in a higher

volume growth of 27% in FY20 and 6% volume growth in FY21 and EBITDA margins

improving to 14.3% by FY21E vs only 12.7% in FY19. Key financial assumptions are

highlighted below:

Fig 18: Key financial assumptions

Units FY17 FY18 FY19 FY20E FY21E

Volumes mmscmd 5.4 6.2 6.5 8.3 8.8

Average Sales realisations Rs/scm 25.9 27.2 32.5 33.0 32.7

RMC Rs/scm 19.4 20.6 25.5 25.7 25.5

Gross margins Rs/scm 6.4 6.6 7.0 7.2 7.2

EBITDA/scm Rs/scm 3.8 3.9 4.1 4.7 4.7

EBITDA margin % 15 14 13 14 14

EBIT margin % 10 10 9 11 11

PAT margin % 4 5 6 7 7

Capex Rsm 4,805 4,589 4,500 4,800 4,800

OpCF (before WC) Rsm 7,617 9,117 9,668 14,302 14,993

RoIC % 7.1 8.2 9.8 13.8 13.7

RoE % 11.7 16.4 20.6 27.2 24.3

ROCE % 10.7 15.1 15.9 24.1 23.6

DER x 1.4 1.1 0.8 0.4 0.2

Source: GGL, Centrum Research estimates

Despite the material capex trajectory, we do not see any dip in Balance Sheet metrics,

with leverage actually declining over the next 2-3 years despite the higher capex run rate.

Return ratios therefore continue to steadily improve over our forecast period along-with

profitability.

7,249 7,433

8,9519,846

14,302

14,993

1,701 2,195 2,9144,290

7,0297,625

-

2.0

4.0

6.0

8.0

10.0

12.0

FY16 FY17 FY18 FY19 FY20E FY21E

0

3,000

6,000

9,000

12,000

15,000

18,000

Rs/

sh

Rsm

n

EBITDA PAT EPS Rs/sh RHS

6 May 2019

12Centrum Institutional Research

Gujarat Gas

Multiple drivers of RoE improvement

Factoring in the multiple levers of improvement in earnings and the quality of the same,

we believe DuPont analysis presents a good picture of the expected boost to the

company’s financial metrics over FY17-21E.

Fig 19: Dupont Analysis for GGL

RoE (5-Point) FY16 FY17 FY18 FY19E FY20E FY21E

Tax Burden (x) 0.7 0.7 0.6 0.7 0.7 0.7

Interest Burden (x) 0.5 0.6 0.7 0.9 0.9 1.0

EBIT Margin (%) 7.8 9.5 10.1 9.0 11.2 11.2

Asset Turnover (x) 1.1 1.1 1.5 1.8 2.2 2.1

Leverage (x) 2.8 2.5 2.3 2.1 1.8 1.6

RoE (%) 8.6 12.2 16.7 21.3 28.4 24.7

Source: GGL, Centrum Research estimates

Valuations – material upside from here

We value GGL using DCF methodology, using a WACC of 11%, DER of 35%, Long term

EBITDA assumption of Rs4.4/scm and Terminal growth rate of 3.5%. The gradual build-up

of volumes from the multiple new areas under development and the new areas won

recently in bidding rounds IX/X imply that returns from the same would flow through only

over the next decade hence we believe earnings multiples do not adequately reflect the

fair value of the business. Our DCF value delivers a price of Rs205/sh, 28% upside from

here.

Fig 20: GGL DCF valuation

FY18 FY19E FY20E FY21E FY22E FY23E FY24E FY25E… ...FY34E

Volumes mmscmd 6.22 6.54 8.31 8.80 9.95 11.24 12.59 14.10 22.91

yoy growth (%)

5 27 6 13 13 12 12 3

EBITDA/Scm 3.9 4.1 4.7 4.7 4.4 4.4 4.4 4.4 4.4

EBITDA 8,951 9,846 14,302 14,993 15,978 18,056 20,222 22,649 36,798

Less Depreciation 2,718 2,880 3,063 3,255 3,055 3,221 3,369 3,488 3,898

EBIT 6,232 6,966 11,239 11,738 12,923 14,834 16,853 19,161 32,901

Less Interest 1,961 1,962 1,701 1,470 2,312 2,438 2,550 2,639 2,950

Other Income 357 1,113 1,113 1,113 1,002 901 811 730 283

PBT 4,628 6,117 10,651 11,381 11,613 13,298 15,114 17,252 30,234

Less Tax 1,715 2,264 3,653 3,815 4,200 4,821 5,477 6,227 10,693

NOPAT 2,914 3,853 6,998 7,566 7,413 8,477 9,637 11,024 19,541

Add Depreciation 2,718 2,880 3,063 3,255 3,055 3,221 3,369 3,488 3,898

Less Capex 4,589 4,945 4,800 4,800 4,500 4,500 4,000 3,200 429

FCF 1,043 1,788 5,260 6,021 5,968 7,198 9,006 11,312 23,009

GBA 63,622 68,466 73,266 78,066 82,566 87,066 91,066 94,266 1,05,348

Debt 23,282 22,031 19,531 17,031 28,898 30,473 31,873 32,993 36,872

Year - - 1.0 2.0 3.0 4.0 5.0 6.0 15.0

Disc factor

1.0 0.9 0.8 0.7 0.7 0.6 0.5 0.2

NPV - 1,788 4,739 4,887 4,364 4,742 5,345 6,048 4,810

NPV total 74,486

TV 3,17,593

PV of Terminal value 66,392

Total NPV potential 1,40,878

Per share for GGL 205

CMP 160

Upside (downside) 28%

Source: GGL, Centrum Research

6 May 2019

13Centrum Institutional Research

Gujarat Gas

Fig 21: Quarterly Financials

Particulars (Rs bn) Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19

Net Sales 14,002 14,780 13,914 15,713 17,336 17,651 19,643 21,174 19,075

Other Operating Income

Total Income 14,002 14,780 13,914 15,713 17,336 17,651 19,643 21,174 19,075

Accretion to Stocks in trade & work in progress

Raw Material Consumed 11,140 10,617 10,400 12,212 13,551 13,504 16,230 16,264 14,638

Purchase of Semi/finished goods/traded goods

Employee Expenses 299 391 332 338 330 360 372 416 451

Other Exp 1,101 1,074 1,156 1,165 1,228 1,301 1,241 1,282 1,445

Operating Profit (Core EBITDA) 1,463 2,698 2,027 1,999 2,227 2,486 1,800 3,212 2,541

Depreciation 643 666 683 688 682 707 724 728 722

EBIT 820 2,032 1,344 1,311 1,545 1,779 1,077 2,484 1,819

Interest 476 496 499 487 479 486 494 485 497

Other Revenue/Income 71 78 89 91 99 95 188 154 187

Other Excep. Items (restructuring, asset sales etc) - - - - - 489 (193) (179) -

Profit Before Tax 415 1,615 934 915 1,165 1,878 578 1,975 1,508

Tax 84 571 323 315 506 664 167 595 343

Tax rate (%) 20.2 35.4 34.6 34.4 43.4 35.3 28.9 30.1 22.7

Profit After Tax 331 1,044 611 600 660 1,214 411 1,380 1,165

Less: Minority interest in income

Add/(Less) - Share in the profit/(loss) of associates

Profit/(loss) from discontinued ops

PAT attributable to Consolidated Group 331 1,044 611 600 660 1,214 411 1,380 1,165

Adjusted PAT for the group 331 1,044 611 600 660 896 536 1,496 1,165

Growth (%)

Net Sales 5.6 (5.9) 12.9 10.3 1.8 11.3 7.8 (9.9)

EBITDA 84.4 (24.9) (1.3) 11.4 11.6 (27.6) 78.4 (20.9)

Adj. PAT 214.9 (41.5) (1.8) 9.9 35.9 (40.2) 179.1 (22.1)

Margin (%)

EBITDA 10.4 18.3 14.6 12.7 12.8 14.1 9.2 15.2 13.3

EBIT 5.9 13.8 9.7 8.3 8.9 10.1 5.5 11.7 9.5

PAT (reported bef minority interest) 2.4 7.1 4.4 3.8 3.8 6.9 2.1 6.5 6.1

Key Drivers

Brent (USD/bbl) 54.0 50.3 52.5 62.0 66.0 74.6 75.5 70.0 64.0

INR/USD 67.1 65.5 64.5 64.5 64.5 67.0 70.0 72.0 70.5

Volumes (mmscm) 544.5 557.0 527.0 579.0 608.0 586.0 613.0 602.6 585.0

Volumes (mmscmd) 6.1 6.1 5.7 6.3 6.8 6.4 6.7 6.6 6.5

CNG (mmscmd) 1.2 1.3 1.3 1.3 1.4 1.4 1.4 1.4 1.5

Domestic (mmscmd) 0.6 0.4 0.5 0.5 0.6 0.4 0.5 0.5 0.6

Industrial/Commercial (mmscmd) 4.3 4.4 4.0 4.5 4.8 4.6 4.7 4.6 4.4

Avg realisation (Rs/scm) 25.7 26.5 26.4 27.1 28.5 30.1 32.0 35.1 32.6

Raw material cost (Rs/scm) 20.5 19.1 19.7 21.1 22.3 23.0 26.5 27.0 25.0

Gross margin (Rs/scm) 5.3 7.5 6.7 6.0 6.2 7.1 5.6 8.1 7.6

EBITDA margin (Rs/scm) 2.7 4.8 3.8 3.5 3.7 4.2 2.9 5.3 4.3

Source: Company, Centrum Research estimates

6 May 2019

14Centrum Institutional Research

Gujarat Gas

P&L Balance Sheet

YE March (Rs bn) FY17 FY18 FY19E FY20E FY21E

YE March (Rs bn) FY17 FY18 FY19E FY20E FY21E

Revenues 50,926 61,743 77,544 99,970 104,944

Equity share capital 1,377 1,377 1,377 1,377 1,377

Materials cost 38,379 46,780 60,830 78,086 81,888

Reserves & surplus 15,072 17,087 20,463 26,259 32,724

% of revenues 75.4 75.8 78.4 78.1 78.0

Shareholders' fund 16,449 18,464 21,840 27,636 34,101

Employee cost 1,282 1,390 1,600 1,760 1,936

Total debt 23,589 23,282 22,031 19,531 17,031

% of revenues 2.5 2.3 2.1 1.8 1.8

Def tax liab. (net) 9,849 10,455 10,816 10,816 10,816

Others 3,832 4,623 5,268 5,823 6,128

Minority Interest

% of revenues 7.5 7.5 6.8 5.8 5.8

Total liabilities 49,887 52,201 54,687 57,983 61,948

EBITDA 7,433 8,951 9,846 14,302 14,993

Gross block 59,162 63,622 68,466 73,266 78,066

EBITDA margin (%) 14.6 14.5 12.7 14.3 14.3

Less: acc. depreciation 10,145 12,695 15,575 18,638 21,892

Depreciation & amortisation 2,573 2,718 2,880 3,063 3,255

Net block 49,017 50,927 52,891 54,628 56,174

EBIT 4,860 6,232 6,966 11,239 11,738

Capital WIP 5,049 4,783 4,885 4,885 4,885

Interest expenses 2,090 1,961 1,962 1,701 1,470

Net fixed assets 54,066 55,710 57,776 59,513 61,059

Other income 263 357 1,113 1,113 1,113

Investments 3,530 2,904 2,496 2,496 2,496

Exceptional items - - (179) - -

Inventories 417 568 694 895 939

PBT 3,033 4,628 5,939 10,651 11,381

Sundry debtors 3,475 3,917 5,103 5,921 5,594

Taxes 838 1,715 1,768 3,621 3,756

Cash 608 1,363 3,092 6,887 9,180

Effective tax rate (%) 27.6 37.0 29.8 34.0 33.0

Loans & advances 1,388 1,871 2,115 2,443 2,831

PAT 2,195 2,914 4,170 7,029 7,625 Other current assets

Minority/Associates

Total current asset 5,888 7,718 11,004 16,146 18,545

Reported PAT 2,195 2,914 4,170 7,029 7,625

Trade payables 13,198 13,749 16,108 19,644 19,570

Adjusted PAT 2,195 2,914 4,290 7,029 7,625

Other current liab. - - - - -

Provisions 399 383 480 528 581

Net current assets (7,709) (6,413) (5,584) (4,026) (1,606)

Ratios

Total assets 49,887 52,201 54,687 57,983 61,948

YE March FY17 FY18 FY19E FY20E FY21E

Cash Flows

Growth (%)

YE March (Rs bn) FY17 FY18 FY19E FY20E FY21E

Revenue (16.6) 21.2 25.6 28.9 5.0 Op profit bef WC changes 7,617 9,117 9,668 14,302 14,993

EBITDA 2.5 20.4 10.0 45.2 4.8 Trade and other receivables (1,155) (1,065) (1,557) (1,347) (106)

Adjusted PAT 43.5 32.7 43.1 68.6 8.5 Trade payables 1,036 817 2,456 3,584 (21)

Margin (%) Net change – WC

Gross 14.6 14.5 12.7 14.3 14.3 Direct taxes (489) (1,040) (1,768) (3,621) (3,756)

EBITDA 6.0 7.5 7.7 10.7 10.8 Net cash from operations 7,010 7,829 8,799 12,918 11,110

Adjusted PAT 4.3 4.7 5.5 7.0 7.3 Capital expenditure (4,786) (4,584) (4,945) (4,800) (4,800)

Return (%) Acquisitions, net

RoE 13.3 15.8 19.6 25.4 22.4 Others 204 278 1,113 1,113 1,113

RoCE 9.7 11.9 12.7 19.4 18.9 Net cash from investing (4,582) (4,306) (3,833) (3,687) (3,687)

RoIC 5.3 7.1 10.0 15.4 15.5 FCF 2,224 3,246 3,854 8,118 6,310

Turnover (days) Issue of share capital - - - - -

Gross block turnover ratio (x) 0.9 1.0 1.2 1.4 1.4 Increase/(decrease) in debt 176 (248) (1,251) (2,500) (2,500)

Debtors 22.0 21.8 21.2 20.1 20.0 Dividend paid (2,729) (2,459) (2,792) (2,935) (2,630)

Inventory 3.9 3.8 3.8 3.7 4.1 Net cash from financing (2,553) (2,707) (4,043) (5,435) (5,130)

Creditors 65.8 79.6 70.3 65.3 68.2 Net change in cash (125) 816 924 3,796 2,293

Solvency (x) Source: Company, Centrum Research estimates

Net debt-equity 2.0 1.8 1.4 0.8 0.5

Debt-equity 2.0 1.8 1.5 1.1 0.8

Interest coverage ratio 2.3 3.2 3.6 6.6 8.0

Gross debt/EBITDA 4.5 3.8 3.3 2.1 1.9

Current Ratio 0.4 0.5 0.7 0.8 0.9

Per share (Rs)

Adjusted EPS 3.2 4.2 6.2 10.2 11.1

BVPS 24 27 32 40 50

CEPS 6.9 8.2 10.4 14.7 15.8

DPS 3.5 4.7 1.2 1.8 1.7

Dividend payout (%) 110.1 110.6 19.3 17.6 15.2

Valuation (x)(Avg Mkt Cap)

P/E (adjusted) 50.1 37.8 25.7 15.7 14.4

P/BV 6.7 6.0 5.0 4.0 3.2

EV/EBITDA 17.4 14.4 12.8 8.4 7.7

Dividend yield (%) 2.2 2.9 0.8 1.1 1.1

Source: Company, Centrum Research estimates

6 May 2019

15Centrum Institutional Research

Gujarat Gas

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Centrum Institutional Research

Gujarat Gas

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Ratings definitions

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Add

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Gujarat Gas

Source: Bloomberg

Centrum Institutional Research

Gujarat Gas

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

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regulations and/or Centrum policies, in circumstances where Centrum is acting

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Spec

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

person unless otherwise stated, this message shoul

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and

Securities and Exchange Board of India before investing in Indian Securities Market.

Ratings definitions

Our ratings denote the following 12

Buy – The stock is expected to return above 15%.

Add – The stock is expected to return 5

Reduce – The stock is expected to deliver

Sell – The stock is expected to deliver <

Gujarat Gas

Source: Bloomberg

Centrum Institutional Research

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

and there can be no assurance that future results or events will be consistent w

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement wit

directors or any other person. Information in this do

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising

Centrum and its affiliates have not managed or co

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve month

report for service in respect of public offerings, corporate finance

or some other sort of specific transaction.

As per the declarations given by them, Mr. Probal Sen, research analyst and and/or any of his family members do not

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

companies in the preceding twelve months. He does not hold any shares by

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our e

ave any other material

time of publication of the research report or at the time of the public appearance.

While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons tha

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compl

regulations and/or Centrum policies, in circumstances where Centrum is acting

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Spec

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

person unless otherwise stated, this message shoul

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and

Securities and Exchange Board of India before investing in Indian Securities Market.

Our ratings denote the following 12-

The stock is expected to return above 15%.

The stock is expected to return 5

The stock is expected to deliver

The stock is expected to deliver <

Centrum Institutional Research

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

and there can be no assurance that future results or events will be consistent w

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement wit

directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising

Centrum and its affiliates have not managed or co-

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve month

report for service in respect of public offerings, corporate finance

or some other sort of specific transaction.

As per the declarations given by them, Mr. Probal Sen, research analyst and and/or any of his family members do not

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

companies in the preceding twelve months. He does not hold any shares by

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our e

ave any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

time of publication of the research report or at the time of the public appearance.

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons tha

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compl

regulations and/or Centrum policies, in circumstances where Centrum is acting

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Spec

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

person unless otherwise stated, this message shoul

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and

Securities and Exchange Board of India before investing in Indian Securities Market.

-month forecast returns:

The stock is expected to return above 15%.

The stock is expected to return 5-15%.

The stock is expected to deliver -5-+5% returns.

The stock is expected to deliver <-5% returns.

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

and there can be no assurance that future results or events will be consistent w

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement wit

cument must not be relied upon as having been authorized or approved by the company or its directors

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising

-managed a public offering for the subject company in the

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve month

report for service in respect of public offerings, corporate finance, debt restructuring, investment banking or other advisory services in a merger/acquisition

As per the declarations given by them, Mr. Probal Sen, research analyst and and/or any of his family members do not

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

companies in the preceding twelve months. He does not hold any shares by

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our e

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

time of publication of the research report or at the time of the public appearance.

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons tha

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compl

regulations and/or Centrum policies, in circumstances where Centrum is acting

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Spec

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

person unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and

Securities and Exchange Board of India before investing in Indian Securities Market.

month forecast returns:

+5% returns.

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement wit

cument must not be relied upon as having been authorized or approved by the company or its directors

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising

managed a public offering for the subject company in the

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve month

, debt restructuring, investment banking or other advisory services in a merger/acquisition

As per the declarations given by them, Mr. Probal Sen, research analyst and and/or any of his family members do not

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

companies in the preceding twelve months. He does not hold any shares by him or through his relatives or in case if holds the shares then will not to do any

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our e

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

time of publication of the research report or at the time of the public appearance.

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons tha

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compl

regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances.

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Spec

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

d not be construed as official confirmation of any transaction. No part of this document may be

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and

Securities and Exchange Board of India before investing in Indian Securities Market.

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

ith any such opinions, estimate or projection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement wit

cument must not be relied upon as having been authorized or approved by the company or its directors

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising

managed a public offering for the subject company in the

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve month

, debt restructuring, investment banking or other advisory services in a merger/acquisition

As per the declarations given by them, Mr. Probal Sen, research analyst and and/or any of his family members do not

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

him or through his relatives or in case if holds the shares then will not to do any

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our e

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons tha

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compl

in an advisory capacity to this company, or any certain other circumstances.

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Spec

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

d not be construed as official confirmation of any transaction. No part of this document may be

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v

ith any such opinions, estimate or projection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement wit

cument must not be relied upon as having been authorized or approved by the company or its directors

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising

managed a public offering for the subject company in the preceding twelve months. Centrum and

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve month

, debt restructuring, investment banking or other advisory services in a merger/acquisition

As per the declarations given by them, Mr. Probal Sen, research analyst and and/or any of his family members do not serve as an officer, director or any way

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

him or through his relatives or in case if holds the shares then will not to do any

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our e

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons tha

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compl

in an advisory capacity to this company, or any certain other circumstances.

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirm

d not be construed as official confirmation of any transaction. No part of this document may be

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for pu

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Cen

are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report

ith any such opinions, estimate or projection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its

cument must not be relied upon as having been authorized or approved by the company or its directors

or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or any other

son accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith.

preceding twelve months. Centrum and

affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this

, debt restructuring, investment banking or other advisory services in a merger/acquisition

serve as an officer, director or any way

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensatio

him or through his relatives or in case if holds the shares then will not to do any

transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our employees and are paid a salary.

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prev

rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable

in an advisory capacity to this company, or any certain other circumstances.

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state,

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would

ifically, this document does not constitute

an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S.

d not be construed as official confirmation of any transaction. No part of this document may be

distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for publication or distribution or

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is

Derivatives Segments” as prescribed by

6 May 2019

ctivity of Centrum Broking and

iew as of the date of this report

h the company or any of its

cument must not be relied upon as having been authorized or approved by the company or its directors

its directors or any other

in connection therewith.

preceding twelve months. Centrum and

s from the date of this

, debt restructuring, investment banking or other advisory services in a merger/acquisition

serve as an officer, director or any way

connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensation from the above

him or through his relatives or in case if holds the shares then will not to do any

mployees and are paid a salary.

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

t may prevent Centrum from

iance with applicable

in an advisory capacity to this company, or any certain other circumstances.

of or located in any locality, state,

jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Centrum

ifically, this document does not constitute

ation of any transaction to any U.S.

d not be construed as official confirmation of any transaction. No part of this document may be

blication or distribution or

ation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless

Derivatives Segments” as prescribed by

6 May 2019

16

trum Broking and

iew as of the date of this report

h the company or any of its

cument must not be relied upon as having been authorized or approved by the company or its directors

its directors or any other

preceding twelve months. Centrum and

s from the date of this

, debt restructuring, investment banking or other advisory services in a merger/acquisition

serve as an officer, director or any way

n from the above

him or through his relatives or in case if holds the shares then will not to do any

mployees and are paid a salary.

conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the

pdate the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are

ent Centrum from

iance with applicable

in an advisory capacity to this company, or any certain other circumstances.

of or located in any locality, state,

subject Centrum

ifically, this document does not constitute

ation of any transaction to any U.S.

d not be construed as official confirmation of any transaction. No part of this document may be

blication or distribution or

prohibited unless

Derivatives Segments” as prescribed by

6 May 2019

17Centrum Institutional Research

Gujarat Gas

Gujarat Gas

4 Whether Research analyst’s or relatives’ have any financial interest in the subject company and nature of such financial interest No

5 Whether Research analyst or relatives have actual / beneficial ownership of 1% or more in securities of the subject company at the end of the month

immediately preceding the date of publication of the document. No

6 Whether the research analyst or his relatives has any other material conflict of interest No

7 Whether research analyst has received any compensation from the subject company in the past 12 months and nature of products / services for

which such compensation is received No

8 Whether the Research Analyst has received any compensation or any other benefits from the subject company or third party in connection with the

research report No

9 Whether Research Analysts has served as an officer, director or employee of the subject company No

10 Whether the Research Analyst has been engaged in market making activity of the subject company. No

11 Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past twelve months; No

12 Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject

company in the past twelve months; No

13 Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage

services from the subject company in the past twelve months; No

Member (NSE and BSE)

Regn No.:

CAPITAL MARKET SEBI REGN. NO.: BSE: INB011454239

CAPITAL MARKET SEBI REGN. NO.: NSE: INB231454233

DERIVATIVES SEBI REGN. NO.: NSE: INF231454233

(TRADING & CLEARING MEMBER)

CURRENCY DERIVATIVES: MCX-SX INE261454230

CURRENCY DERIVATIVES:NSE (TM & SCM) – NSE 231454233

Depository Participant (DP)

CDSL DP ID: 120 – 12200

SEBI REGD NO. : CDSL : IN-DP-CDSL-661-2012

PORTFOLIO MANAGER

SEBI REGN NO.: INP000004383

Research Analyst

SEBI Registration No. INH000001469

Mutual Fund Distributor

AMFI REGN No. ARN- 147569

Website: www.centrum.co.in

Investor Grievance Email ID: investor.grievances@centrum.co.in

Compliance Officer Details:

Ashok D Kadambi

(022) 4215 9937; Email ID: compliance@centrum.co.in

Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)

Registered Office Address

Bombay Mutual Building ,

2nd Floor, Dr. D. N. Road,

Fort, Mumbai - 400 001

Corporate Office & Correspondence Address

Centrum House

6th Floor, CST Road, Near Vidya Nagari Marg, Kalina, Santacruz (E),

Mumbai 400 098.

Tel: (022) 4215 9000 Fax: +91 22 4215 9344

Disclosure of Interest Statement

1 Business activities of Centrum Broking

Limited (CBL)

Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives

Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL and a SEBI registered

Portfolio Manager.

2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.

3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)