Though equity markets remained volatile, Gujarat's public sector companies have been luring investors with attractive valuations and have outperformed benchmark index - Sensex in recent trades.
Gas distribution and transmission players, Gujarat Gas Company Ltd (GGCL) a subsidiary of Gujarat Distribution Network Ltd (GDNL) and Gujarat State Petronet Ltd (GSPL) along with mining major Gujarat Mineral Development Corporation Ltd (GMDC) have witnessed sharp gains on the stock exchanges in past six trading sessions, while the broader index, S&P BSE Sensex has remained largely volatile with barely 0.5 per cent gains in same period.
In the past six trading sessions, GGCL shares have jumped by over 28 per cent, Gujarat State Petronet Ltd (GSPL) and Gujarat Alkalies and Chemicals Ltd (GACL) shares have increased by 11 per cent and 10.5 per cent respectively. GMDC shares have soared by close to 9.5 per cent, bringing attractive returns for retail investors in short time.
Heavy buying in Gujarat government PSU counters pushed up share prices of GGCL and GMDC along with GSPL and GACL.
"GGCL has beaten the fears regarding the change of management of a multinational major BG Group to state government. We see further upside in the counter. Also, other PSUs are showing signs of uptrend, as they were gripped in the bearish sentiment of market," said Kishor Ostwal, chairman and managing director of CNI Research Ltd. "The recent rally shows that some buyers have started buying," he added.
Though companies like GMDC and GACL have reported fall in net profit for the quarter ended June, attractive valuation at the current levels has lured investors.
"In Gujarat Gas, it's the good results of this quarter so it is showing strength, while GMDC, after hitting 52-week low of Rs 79.60 some investors find it as a value pick, so there is upside in stock," said Vaibhav Shah of Monarch Projects - an investment advisory firm.
"Some smart investors believe that in a probability, state government may hike stake in GMDC just as it did in GACL. This should not mean that retail investors are back for state PSUs," Shah added.
Even state government has increased its promoter holding in the company from around 36.72 per cent in December 2012 quarter to 41.61 per cent in June 2013 quarter. It still continues to purchase additional shares from open market, through various subsidiaries. This pushed up the stock prices of GACL during January - March quarter.
Gujarat Gas shares touched Rs 232 during Monday last trades after reporting a robust 91 per cent year-on-year (yoy) jump in its consolidated net profit for the first quarter ended June, on lower raw material cost. The company recorded profit of Rs 52.89 crore during the same quarter year ago.
"GGCL's raw material cost has declined by 14.5 per cent and 15.7 per cent on sequentially at Rs 542 crore during the recently concluded quarter. This decrease in raw material cost helped GGCL to enable some recovery of margins which were impacted in the preceding quarter," said an analyst at Tradebulls - a brokerage in Ahmedabad.
The stock had rallied by over 40 per cent in just three trading sessions from Rs 162 on August 7.
GMDC, on the other hand, has reported lower first quarter profit at Rs 11.86 crore against Rs 17 crore in the corresponding period last year.
Similarly, chemicals major, GACL has posted gains of close to 12 per cent since August 7. The company shares closed at Rs 161.50 on Tuesday on BSE. However, GACL's profits dipped by 32 per cent at Rs 37.30 crore for the quarter as against Rs 55.27 crore in the similar period of the previous year.
