PSU Stock to Buy: Brokerages pick this gas stock trading under Rs 610 after strong results; check out target and stop loss

PSU Stock to Buy: Following strong quarterly results, brokerage Nuvama recommends investing in Gujarat Gas from a long-term perspective. The PSU gas stock has delivered a 30 per cent return over the past year. Despite falling over 2 per cent in Friday's trading session (August 9), Nuvama highlights robust volume growth as a positive indicator.

Gujarat Gas: Target Price set at Rs 745

Nuvama has maintained its "buy" recommendation on Gujarat Gas shares, setting a one-year target price of Rs 745. As of August 9, 2024, the stock closed at Rs 608.15, a 2.17 per cent down from the previous closing. 

Similarly, Motilal Oswal has issued a "buy" recommendation with a target price of Rs 715, noting that while the quarter was strong, the volume guidance remains conservative.

Over the past year, Gujarat Gas has delivered a 30 per cent return, with a 26 pe cent increase so far in 2024.

Gujarat Gas: Brokerages' Analysis and Outlook

According to brokerage analysis, Gujarat Gas Limited (GGL) reported a 38 per cent year-on-year (YoY) increase in EBITDA to Rs 540 crore in the first quarter of FY25, while net profit surged 53 per cent YoY to Rs 330 crore. These strong results were driven by a 19 per cent YoY and 13 per cent quarter-on-quarter (QoQ) increase in volume, resulting in an EBITDA margin of Rs 5.4/scm (+16 per cent YoY).

The management has indicated a potential 30-40 per cent decline in Morbi volumes due to the upcoming festive season, geopolitical tensions in the Middle East, and higher freight rates. However, the brokerage expects volumes to be supported by a 47 per cent reduction in GSPL's tariff. As a result, the brokerage has raised its FY25E/26E EPS estimates by 5 per cent/2 per cent and increased its target price to Rs 745.

Disclaimer: The views/suggestions/recommendations expressed here in this article are solely by investment experts. Zee Business suggests its readers consult their investment advisers before making any financial decision.