Gujarat Gasoline: Reiterate ‘purchase’ with TP of Rs 560
GUJGA could be the most important beneficiary of any directive on Inexperienced Tax introduced by MoRHT (seek advice from our report) – as Gujarat has no authorities directive on the usage of CNG but.
Gujarat Gasoline (GUJGA) has proved to be a transparent outperformer for the reason that curbing of polluting fuels at Morbi – an impetus by the federal government towards the adoption of greener gasoline. 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’ve upgraded our EPS each quarter since then (from Rs 12.3 to Rs 19.9 for FY22E) on the again of better-than-expected quantity progress. CGDs have been a real consumption story and, as highlighted in Exhibit 1, the market has all the time valued quantity progress for these names. GUJGA has clocked quantity progress 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 progress over the subsequent two years as nicely.
The Ceramic Affiliation of Morbi expects progress 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’ve been highlighting that any additional air pollution management measure or impetus on rising fuel 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 (seek advice from 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 progress potential of 10–12% over the medium time period) – we worth the inventory at 24x (from 22x earlier) to reach at goal worth of Rs 560/share. Reiterate Purchase, with the opportunity of additional earnings upgrades going ahead.
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