Gujarat Gas stock downgraded by ICICI Securities on Morbi volume concerns

Published 07/08/2025, 09:38
Gujarat Gas stock downgraded by ICICI Securities on Morbi volume concerns

Investing.com - ICICI Securities downgraded Gujarat Gas Ltd (GUJGA:IN) from Buy to Add and lowered its price target to INR480.00 from INR650.00 on Thursday.

The downgrade follows Gujarat Gas’s Q1FY26 results, which showed EBITDA of INR5.2 billion and PAT of INR3.3 billion, representing year-over-year declines of 3% and 1% respectively. These figures fell below ICICI Securities’ estimates of INR6.3 billion for EBITDA and INR3.9 billion for PAT.

The primary factor behind the earnings miss was significantly lower volume from the Morbi industrial area, which came in at approximately 2.5 mmscmd versus the analyst’s estimate of 3.1 mmscmd. Morbi volumes declined approximately 52% year-over-year in Q1, with the last four-quarter average volume of 2.9 mmscmd down 16% compared to the previous six-quarter average.

The CNG and domestic segments showed strong performance with 12% and 11% year-over-year volume growth respectively. Gujarat Gas now operates 830 stations, serves 2.3 million households, and has signed 69 FDODO agreements to accelerate CNG station deployment.

Despite a price cut of approximately INR3/scm implemented on August 1, 2025, propane remains more than INR3/scm cheaper, creating "material uncertainties on volume growth over next 12-18 months," according to ICICI Securities, which sees "limited triggers in the near term" despite "unchallenging" valuations.

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