Analysts' corner

Gujarat Gas & Indraprastha Gas Ltd

Gujarat Gas
Reco price: Rs 377
Target price: NA
Gujarat Gas (GGas) has guided to 8-10 per cent growth in volumes for CY11. However, it runs the risk of degrowth in its direct firing (DF) segment, if gas prices remain higher or inch up further. The DF segment constitutes 21 per cent of GGas’ sales volumes. The company is likely to focus on increasing volumes in the high-value customer segment of DF (with customers willing to pay higher prices). The company is currently focused on continuing penetration into untapped markets in Gujarat. Accordingly, it has bid to operate in the Bhavnagar district. The company plans to revise prices more frequently as against quarterly revision. Management expects sustainable margins of 18-20 per cent.

—Edelweiss Securities

Indraprastha Gas Ltd
Reco price: Rs 299
Target price: Rs 357
Indraprastha Gas Ltd (IGL) has a CNG compression capacity of 3.52mn kg per day and fuels more than 400,000 vehicles daily. In the PNG segment, IGL provides natural gas to over 210,000 domestic and 300 commercial customers. It also supplies re-gasified liquefied natural gas (R-LNG) to 58 industrial consumers. IGL has increased the number of CNG stations from 181 in FY09 to 241 stations by the end of FY10 and it plans to further strengthen its CNG stations count to 281 by the end of FY11. Analysts expect total PNG sales to grow from Rs 143 crore in FY10 to Rs 363 crore in FY13 (at a CAGR of 36 per cent). Initiate coverage with a “Buy”.

—Asit C Mehta Investment