Gujarat Gasoline: Reiterate ‘purchase’ with TP of Rs 560

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GUJGA could be the most important beneficiary of any directive on Inexperienced Tax introduced by MoRHT (confer with our report) – as Gujarat has no authorities directive on the usage of CNG but.

Gujarat Gasoline (GUJGA) has proved to be a transparent outperformer because the curbing of polluting fuels at Morbi – an impetus by the federal government towards the adoption of greener gas. Since our improve in Dec’19, the inventory is up 116% – it has outperformed the Nifty by ~95% – regardless of which the inventory trades at 21x FY23E EPS at present. Apparently, we have now upgraded our EPS each quarter since then (from Rs 12.three to Rs 19.9 for FY22E) on the again of better-than-expected quantity development. CGDs have been a real consumption story and, as highlighted in Exhibit 1, the market has all the time valued quantity development for these names. GUJGA has clocked quantity development of ~8% QoQ every time since 1QFY20 – regardless of the COVID-led disruption witnessed in 1HFY21. Over the previous 5 years, the corporate has posted a quantity CAGR of ~11%; we construct in the identical quantity development over the subsequent two years as effectively.

The Ceramic Affiliation of Morbi expects development of 25–30% in FY22 (v/s ~15% in FY21) as 60 extra industrial items are more likely to be commissioned over Oct–Dec’21 and the present items would endure additional expansions. Additionally, we have now been highlighting that any additional air pollution management measure or impetus on rising gasoline consumption in India hereafter would profit GUJGA considerably (v/s the opposite two incumbents).

GUJGA could be the most important beneficiary of any directive on Inexperienced Tax introduced by MoRHT (confer with our report) – as Gujarat has no authorities directive on the usage of CNG but. Factoring in the entire above, the inventory calls for an improve, thus closing the hole v/s IGL (identical quantity development potential of 10–12% over the medium time period) – we worth the inventory at 24x (from 22x earlier) to reach at goal value of Rs 560/share. Reiterate Purchase, with the potential for additional earnings upgrades going ahead.

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