Gujarat Gas Company-Buy Gujarat Gas; target Rs 501: Firstcall Research

Firstcall Research is bullish on Gujarat Gas Company (GGCL) and has recommended buy rating on the stock with a target of Rs 501 in its September 13, 2011 research report.

“Gujarat Gas Company, during the quarter ended, the robust growth of Net Sales is increased by 39.91% Rs. 5844.55 million. The company’s net sales and net profit are expected to grow at a CAGR of 24% and 32% over FY10 to FY13E. GGCL distributes gas to about 325,000 industrial, commercial and domestic customers through a pipeline network of approximately 3850 kms and CNG to over 153,000 vehicles through 42 retail outlets.”

“Gujarat Gas Co. Ltd has reported profit of Rs 965.81 million for the quarter ended on June 30, 2011 as against Rs 578.11 million in the same quarter last year, an increase of 67.06%. It has reported net sales of Rs 5844.55 million for the quarter ended on June 30, 2011 as against Rs 4177.27 million in the same quarter last year, a rise of 39.91%. Total income grew by 41.45% to Rs 5986.22 million from Rs.4232.15 million in the same quarter last year. During the quarter, it reported earnings of Rs 7.53 a share.”

“At the current market price of Rs 436, the stock is trading at 16.31 x CY11E and 13.96 x CY12E respectively. Earning per share (EPS) of the company for the earnings for CY11E and CY12E is seen at Rs.26.76 and Rs.31.27 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 24% and 32% over 2009 to 2012E respectively. On the basis of EV/EBITDA, the stock trades at 10.02 x for CY11E and 8.64 x for CY12E. Price to Book Value of the stock is expected to be at 4.83 x and 3.59 x respectively for CY11E and CY12E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 501 for Medium term investment,” says Firstcall research report.