Gujarat Gas targets Morbi-led volume recovery as gas trading scales

Integrated Energy Company Transition

PL Research’s June 2, 2026 result update covers Gujarat Gas’s transition into an integrated energy company. Effective May 1, 2026, GSPC, GSPL and GSPC Energy were amalgamated into Gujarat Gas, while GSPL’s transmission business was demerged into GSPL Transmission. Gujarat Gas was subsequently renamed Gujarat Energy Ltd on May 14, 2026. PL notes that historical financial data is not comparable following the amalgamation.

Q4FY26 and FY26 Financial Performance

For FY26, revenue declined 12.7 per cent year on year to Rs 242.0 billion, while EBITDA increased 2.4 per cent to Rs 31.5 billion and reported PAT rose 7.5 per cent to Rs 18.2 billion.

CGD Volume Trends and Morbi Recovery

CGD sales volume improved 5.8 per cent quarter on quarter to 8.9 mmscmd in Q4FY26. The increase was led by CNG growth of 4.3 per cent, domestic PNG growth of 9.6 per cent and industrial/commercial PNG growth of 6.3 per cent.

Total CGD volume nevertheless declined 4.6 per cent year on year, as industrial/commercial PNG volume fell 16.0 per cent. This was partly offset by CNG growth of 11.8 per cent and domestic PNG growth of 2.2 per cent. FY26 CGD volume fell 9.6 per cent to 8.7 mmscmd, mainly reflecting a 23.3 per cent drop in industrial PNG volume. Gujarat Gas indicated FY26 CGD EBITDA of Rs 6.2 per scm.

Management said Morbi volume averaged 2.02 mmscmd in Q4FY26, rising 21 per cent quarter on quarter. Peak Morbi volume was running at about 8.0 mmscmd, with potential to reach 8.8-8.9 mmscmd, aided by tighter propane availability and higher PNG adoption.

• The company added about 43,000 domestic PNG customers in Q4FY26, taking total connections to 24.2 lakh.
• CNG sales reached a record 3.6 mmscmd, while the CNG vehicle base rose 15 per cent year on year to 17.7 lakh.
• Management guided for FY27 CGD EBITDA of Rs 5.5-6.5 per scm.
• Management guided for FY27 CGD and E&P capex of Rs 10 billion and Rs 1 billion, respectively.

Gas Trading Growth and LNG Sourcing

Gas trading gross volume was 10.2 mmscmd in FY26, with net volume of 4.9 mmscmd after 5.3 mmscmd was supplied to CGD. The Q1FY27 run-rate was about 14 mmscmd gross and 5.5 mmscmd net.

Management expects sustainable annual gas-trading profitability of about Rs 10-11 billion and targets 25-30 per cent volume growth by FY31. The company has long-term LNG sourcing contracts with QatarEnergy, Shell, TotalEnergies and Uniper. However, it acknowledged the loss of two LNG cargoes in May and June 2026 due to the West Asia conflict.

Estimates, Valuation and Recommendation

PL raised its FY27E and FY28E CGD volume assumptions to 11.5 mmscmd and 10.3 mmscmd from 9.1 mmscmd and 9.6 mmscmd, respectively, driven by an expected recovery in Morbi. It reduced its EBITDA per scm estimates to Rs 5.2 and Rs 5.8 from Rs 5.9 and Rs 6.0.

PL downgraded the rating to HOLD from Accumulate, citing the need to monitor the sustainability of Morbi-led growth and the execution of the integrated businesses. Its target price of Rs 380, raised from Rs 342, is based on a sum-of-the-parts valuation using 13 times EV/EBITDA for CGD and 5 times for gas trading, E&P and power.