'Sell' Gujarat Gas Shares Recommends Yes Securities Post Q1 Results — Check Target Price
Yes Securities sees limited upside to margins as Gujarat Gas is increasingly reliant on Brent/Henry Hub-linked long-term contracts), which could dilute sourcing flexibility.
While Gujarat Gas has delivered stable overall volumes (~9.6 mmscmd in FY25, up 3% YoY), the near-term trajectory appears muted, particularly due to structural weakness in the Morbi industrial cluster (~30%+ of volumes), where demand fell sequentially and remains soft in Q1 FY26.
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Yes Securities Report
Given Gujarat Gas Ltd.'s cashflows and reasonable capex the company is rapidly de-levering and maintaining a decent RoCE. We forecast spreads of Rs/scm 5.8/6 for FY26/27.
The stock trades at 24.3x/22.1x FY26e/27e PER. We value it on a PER basis assigning a 18x multiple and, recommend a Sell with a target price of Rs 350/share.
While Gujarat Gas has delivered stable overall volumes (~9.6 mmscmd in FY25, up 3% YoY), the near-term trajectory appears muted, particularly due to structural weakness in the Morbi industrial cluster (~30%+ of volumes), where demand fell sequentially and remains soft in Q1 FY26.
Propane continues to undercut natural gas by Rs 3–4/scm, limiting industrial offtake recovery. Though CNG volumes have seen healthy double-digit growth (12% YoY) on strong vehicle additions and a supportive cost differential vs liquid fuel, it is insufficient to offset the core industrial drag.
We see limited upside to margins as the company is increasingly reliant on Brent/Henry Hub-linked long-term contracts (~50% of mix), which could dilute sourcing flexibility.
Short-term earnings may also be weighed down by elevated opex and lack of strong margin levers.
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