GUJGASLTD - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.9

📊 Core Financials

• Revenue & Profit Growth: Quarterly PAT declined from 327 Cr. to 281 Cr. (↓ 14%), YoY profit variation at -8.44% shows earnings pressure.
• Margins: ROCE at 19.6% and ROE at 14.3% indicate healthy profitability and efficient capital use.
• Debt Ratios: Debt-to-equity at 0.02 reflects negligible leverage, strong financial stability.
• Cash Flows: Dividend yield at 1.55% provides steady shareholder returns, supported by consistent earnings.

💹 Valuation Indicators

• P/E Ratio: 24.3, slightly above industry PE of 20.4, suggesting mild overvaluation.
• P/B Ratio: Current Price / Book Value ≈ 3.1, trading at a premium to book value.
• PEG Ratio: -6.33, distorted due to declining earnings, limiting valuation reliability.
• Intrinsic Value: Based on EPS (₹16.2) and industry PE, fair value ≈ ₹330–340, below current price.

🏢 Business Model & Competitive Advantage

• Gujarat Gas operates in city gas distribution, supplying CNG and PNG to industrial, commercial, and residential customers.
• Strong distribution network and regulatory backing provide competitive advantage.
• Low debt enhances resilience, though profitability is sensitive to gas price fluctuations.

📈 Entry Zone & Holding Guidance

• Entry Zone: Attractive between ₹360–380, closer to 52-week low and intrinsic value.
• Long-Term Holding: Suitable for investors seeking exposure to clean energy and gas distribution, but earnings volatility requires caution.

✅ Positive

• Low debt-to-equity ratio (0.02), strong financial stability.
• Dividend yield at 1.55% provides steady income.
• Healthy ROCE (19.6%) and ROE (14.3%).

⚠️ Limitation

• Quarterly PAT declined (↓ 14%).
• P/E ratio (24.3) above industry average (20.4).
• PEG ratio negative (-6.33), valuation distorted by weak earnings growth.

📉 Company Negative News

• FII holdings reduced (-0.16%) and DII holdings reduced (-0.03%), showing declining institutional confidence.
• Profitability under pressure due to rising input costs and demand fluctuations.

📢 Company Positive News

• Strong distribution network and leadership in city gas distribution.
• Dividend yield and low debt provide investor comfort.

🏭 Industry

• Industry PE at 20.4, lower than company’s valuation.
• Gas distribution sector benefits from government push for clean energy and rising demand for CNG/PNG.
• Sector remains sensitive to global LNG prices and regulatory changes.

🔎 Conclusion

• Gujarat Gas shows strong fundamentals with low debt and healthy return ratios but faces earnings pressure.
• Valuation is slightly stretched compared to intrinsic value and industry peers.
• Entry recommended near ₹360–380; long-term hold viable for clean energy exposure with cautious outlook.