Hold Gujarat Gas Company Ltd - PINC Result Review

Gujarat Gas Company Ltd's (GGCL) Q2CY10 standalone topline were inline with our estimate as net sales grew by 23.5% YoY to Rs4.1bn (our estimate was Rs4.0bn). OPM stands flat at 20.5% YoY however, net profit rose by 20.6% to Rs570mn against our estimate of Rs720mn.

VALUATIONS AND RECOMMENDATION

At the CMP of Rs306, the stock trades at a P/E of 18.0x and 16.3x discounting its CY10E and CY11E EPS of Rs17.0and Rs18.8 respectively. It trades at EV/Sales and EV/EBIDTA of 2.1x and 12.4x its CY10E respectively. Assuming a terminal growth rate of 2%, and volumes of 4.9mmscmd in CY14, we arrive at a DCF value of Rs302/share which is 16x CY11E EPS and 13.3x CY11E CEPS. Thus, we maintain our 'HOLD' recommendation.

Source : Equity Bulls

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