The June '11 quarter results of Gujarat Gas were surprisingly strong, as the company undertook price hikes in anticipation of an increase in LNG costs that didn't happen. Still the company is facing challenges on volume growth and is unlikely to sustain current high margins going ahead. However, the scrip doesn't appear to face any correction risks.
For a city gas distribution company, the 67% profit growth reported by Gujarat Gas for the June quarter exceeded expectations. The company posted a strong 41% revenue growth to Rs 576.6 crore and improved operating profit margin by 180 basis points to 23.9%. Most of the company's revenue growth came from higher prices. It implemented an across-the-board price hike in April '11, which took the average sales realisation 35.6% higher y-o-y to Rs 19.1 per standard cubic meter (scm). In comparison, the volume growth was a paltry 1.8% to 302 million cubic meters.
For a city gas distribution company, the 67% profit growth reported by Gujarat Gas for the June quarter exceeded expectations. The company posted a strong 41% revenue growth to Rs 576.6 crore and improved operating profit margin by 180 basis points to 23.9%. Most of the company's revenue growth came from higher prices. It implemented an across-the-board price hike in April '11, which took the average sales realisation 35.6% higher y-o-y to Rs 19.1 per standard cubic meter (scm). In comparison, the volume growth was a paltry 1.8% to 302 million cubic meters.
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